Studies Show Temporary Drug Program...

Grace-Marie Turner Heated criticism of the new Medicare drug discount cards is discouraging many seniors from enrolling in the program, but several new studies show those who don’t sign up could be leaving thousands of dollars on the table.

Medicare’s new prescription drug discount card program offers seniors the opportunity to enroll in private drug card plans, and also provides $600 in government subsidies this year and next to low-income seniors to help in buying their medicines. In addition, major pharmaceutical companies have partnered with the card plans to offer their drugs at reduced and sometime no cost to low- and moderate-income seniors.

Studies show that these three features of the program work together to provide savings:

  • The Center for Medicare and Medicaid Services says seniors can save up to 85% off national average retail prices when the drug card discounts, the $600 subsidy, and the manufacturer wrap-around programs are combined.
  • A study by Joseph Antos of the American Enterprise Institute (AEI) found that low-income seniors can save between 53 and 78% on their drugs if they take full advantage of the programs.
  • A study by the Lewin Group, a Fairfax-based economic consulting firm, shows that low-income seniors could save between 29 and 92% on their medications.
  • The Business Roundtable (BRT) did a state-by-state analysis and found that about 105,000 California seniors are eligible for the $600 cash subsidy, and another 3.2 million could benefit from drug discount card savings. The BRT estimates that the total benefit to California seniors in 2004 and 2005 could be $518 million.
  • When Congress passed the Medicare reform bill last year, it created two new drug benefits. One, costing at least $400 billion, will add a permanent prescription drug benefit to Medicare starting in 2006.

    But Congress and the White House knew that many seniors, especially those with low-incomes and no drug coverage, needed help right away.

    As a result, they created a “transitional cash assistance” program that went into effect on June 1 of this year. The program provides $600 this year and next to low-income seniors who enroll in any of about 40 competing private discount card plans.

    Howard Bedlin, vice president of the National Council on the Aging, said during a recent forum that “it’s a no-brainer for low-income seniors to enroll: They’ve got nothing to lose since the cards are free and a lot to gain since the subsidies and savings are substantial.”

    All seniors are eligible to enroll in the cards and receive the discounts. Seniors who make less than $12,569 and couples with incomes under $16,862 are eligible for a $600 government subsidy on their cards both this year and next and pay no enrollment fee for the cards (others pay no more than $30 a year to enroll).

    In addition, major pharmaceutical companies offer special programs to boost the value of the discount cards so low- and moderate-income seniors can purchase their drugs for as little as $12 to $15 a month, with some offering their drugs free to low-income seniors.

    Medicare administrator Mark McClellan testified recently before Congress that fewer than 15% of those who are eligible for the $600 assistance program are signed up.

    Even seniors who don't qualify for the full subsidy may find generous savings on their drug bills, especially if they don’t have Medigap or retiree drug coverage.

    AEI found that moderate and higher-income seniors who don’t have drug coverage likely will find that the Medicare drug cards offer them the best deals as well, with savings of up to 24%. AEI found that prices available on June 1 through the cards were 5 to 50% lower than prices offered by well-known discounters.

    There has been a great deal of criticism that the program is too complex and that drug companies raised their prices to cancel out the discounts. Medicare has made many changes to streamline the enrollment process, boosting the number of operators taking calls to 3,000 and simplifying website enrollment. Regarding prices, data compiled by the U.S. Bureau of Labor Statistics shows that from November 2003 to March 2004, prescription drug inflation for all drugs was just 1.5 percent.

    Despite the bad press, more and more seniors seem to be figuring out for themselves that this is a good deal. About four million seniors are enrolled in the discount card program, and 125,000 more are signing up for cards every week.

    Seniors can find out for themselves if they qualify for the savings by calling 1-800-Medicare.

    Grace-Marie Turner is president of the Galen Institute, a not-for-profit public policy research organization based in Alexandria that specializes in health reform issues. She can be reached at P.O. Box 19080, Alexandria, VA 22320, or

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