Analysts: Medicare drug costs will rise

iVillage Member
Registered: 03-23-2003
Analysts: Medicare drug costs will rise
20
Wed, 11-26-2003 - 11:27am

http://seattlepi.nwsource.com/national/apwashington_story.asp?category=1153&slug=Medicare%20Numbers


Tuesday, November 25, 2003 · Last updated 6:54 p.m. PT


Analysts: Medicare drug costs will rise


By MARK SHERMAN
ASSOCIATED PRESS WRITER


WASHINGTON -- Seniors will face annual increases in premiums and deductibles - and a growing gap in coverage - for the prescription drugs they buy under the new Medicare law, budget analysts say.


For example, the $250 annual deductible at the start of the program in 2006 is projected to rise to $445 by 2013.


The legislation that won final congressional approval Tuesday would allow seniors to buy coverage - at an estimated monthly premium of $35 - for their prescription drugs beginning in three years. After they agreed to the monthly premiums and paid their first $250 in pharmacy bills, the coverage would kick in, paying 75 percent of their bills between $250 and $2,250.


After that, there would be no further coverage until beneficiaries' drug bills for the year reached $5,100, leaving a gap of $2,850 that they would have to pay out of their own pockets. Above $5,100 the insurance would pick up roughly 95 percent of costs.


Those are the numbers supporters of the bill have used, with little mention that they would change in future years.


But after just one year, the Congressional Budget Office projects that seniors would see their $250 deductible and the $2,850 gap for which there is no coverage both jump 10 percent.


By 2013, the eighth year of the program, the deductible and the coverage gap are both projected to grow by 78 percent.


In other words, seniors would pay a $445 deductible and those with the largest drug bills would be entirely responsible for more than $5,000 in drug costs.


"I think these numbers will come as a shock to consumers and they are pretty optimistic projections based on what drug costs are going to do," said Gail Shearer, a health policy analyst at Consumers Union and an opponent of the legislation. She noted the focus has been on 2006, the year the prescription drug benefit begins.


At the same time, CBO said, Medicare's contribution also would rise each year so that the program would pay $1,500 of the first $2,250 in drug costs in 2006 and $2,666 of the first $4,000 in 2013.


Insurance premiums, which are not set in the bill even for 2006, are projected to increase 65 percent to $58 a month by 2013.


The numbers were contained in a CBO analysis provided to Sen. Don Nickles, R-Okla., the Senate Budget Committee chairman, and are posted on the CBO Web site.


The projections reflect the lawmakers' decision to tie the cost of the program to increases in drug costs from inflation, new costly drugs coming on the market and expected increases in drug purchases.


"The numbers inflate with the cost of the program. I think that's a good provision," said Nickles, who voted against the bill.


But David Certner, an official of AARP, said: "One of our complaints has been that this benefit would become more unaffordable over time if pegged to drug costs. This bill does not do enough to hold down drug costs."


The AARP tried but failed to get Congress to include measures to slow the rise of drug prices - including allowing cheaper drugs from Canada and giving Medicare authority to negotiate drug prices. Still, the 35-million-member seniors organization endorsed the bill.


"This is a key issue we'll be coming back to," Certner said.


CBO Director Douglas Holtz-Eakin said there is not even an assurance that the initial monthly premium for the drug benefit will be $35. That number could change by 2006 depending on the many "moving pieces" on which the formula is based, he said.


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On the Net:


Congressional Budget Office: http://www.cbo.gov/


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iVillage Member
Registered: 04-16-2003
Wed, 11-26-2003 - 12:41pm
Below are excerpts form Robert J. Samuelson commentary “Medicare as Pork Barrel.

The drug benefit is a blatant pitch for the votes of the elderly that worsens the long-term budget outlook and will be paid for by the young

In its first decade, costs are estimated at about $400 billion, which isn’t so much compared with projected total federal spending of $28 trillion. But if a new “blockbuster” drug appears, forget the $400 billion estimate. Spending will explode anyway as baby boomers retire and drug use rises. Douglas HoltzEakin, director of the Congressional Budget Office, puts the second decade’s costs between $1.3 trillion and $2 trillion.

Who’s going to pay? Well, tomorrow’s workers—the main taxpayers. They’re today’s children and young adults. The drug benefit will add to the huge costs of retirement programs. By 2030, the number of Medicare beneficiaries rises almost 90 percent, to 77 million. As a share of national income, spending on Social Security, Medicare and Medicaid (which covers some nursing-home care, too) is already projected to jump about 80 percent by 2030. To pay for this spending would require a tax increase of roughly 35 percent, which, in today’s dollars, is about $700 billion annually. And that’s before a drug benefit.

Everyone in the White House and Congress knows this. But the young aren’t paying attention, and so they’re ignored. Supporting the drug benefit then becomes an exercise in short-term politics. To wit:

- The White House wants more elderly voters in 2004.

- Drug companies think sales and profits may improve. Demand will rise and they’ll be paid (by Medicare) for some drugs they now give away.

- Corporate America sees a way to drop its retiree drug insurance (to limit that, the bill offers—over 10 years—$71 billion to companies that keep coverage).

http://www.msnbc.com/news/997010.asp#BODY

What the article doesn’t mention is that pharmacies won their battle to prevent Medicare buy in bulk and thus negotiating price, nor the subsidies they will receive from the gov't. It doesn’t mention the insurance companies and HMOs who will benefit from this bill.

I did my research on this yesterday, and didn’t save the information. Including a chart that clearly shows the costs and benefits.

iVillage Member
Registered: 03-23-2003
Wed, 11-26-2003 - 5:21pm

I'm still a couple of decades away from even being eligible for Medicare, but my mom is livid.


iVillage Member
Registered: 03-18-2000
Sat, 11-29-2003 - 11:43am

>"She's also furious with AARP for supporting this bill."<


Me too, I disgusted.


>"Shut out of the room, a hapless Daschle tried to play an outside game—rallying seniors against the measure. But Frist outfoxed him. He began huddling privately with top

 


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iVillage Member
Registered: 04-16-2003
Sun, 11-30-2003 - 11:23am
I watch C-SPAN in the am and was surprised at the number of seniors who stayed up all night to watch the vote. Most were livid that the vote was kept open for so long, far surpassing the 15 minuets allowed. Many were angry because they were sold out by AARP, whether they wanted to foster their insurance business or pander to the near eligible AARPers, what matters is their current membership will drop. Also I have from many traditional conservatives that the party's big government spending and sky-rocketing deficit is dampening their belief in the GOP. I happen to think GWB is playing to the next election. If he really is interested in the senior's vote, he may have played the wrong hand.
iVillage Member
Registered: 04-16-2003
Sun, 11-30-2003 - 12:35pm
New plan fails half of elderly in 2006

The U.S. Congress passed a bill this week that (among other things) creates a new "Part D" of Medicare that would offer a prescription drug benefit for recipients. Despite it being touted as a boon to seniors, the new Medicare drug benefit is likely to help only half of the elderly population in 2006. An analysis of the bill shows that 50% of the over-65 population would face pharmaceutical expenses too low to reap any benefits from Part D in 2006, the first year of the new program.

Take, for instance, individuals who expect to need $700 in prescription drugs in 2006. If these people buy into the proposed drug benefit plan, they will first pay a total of $670 for the plan premium ($420) and the deductible ($250). For expenditures exceeding the deductible but below $2,250, the new Medicare Part D covers 75% of the costs. So in the current example, these enrollees would spend about $112.50 in co-payments for their $700 worth of medication. Ultimately, those in this scenario under Medicare Part D would shoulder a total cost of $782.50 ($112.50 co-pay plus $670 in premium and deductible), while those without the plan would have simply spent $700 on their drugs.

Essentially, anybody with less than $810 in expected annual drug costs will not reap any benefits under Part D, and this constitutes half of the over-65 population. *The chart below shows total drug costs and out-of-pocket drug expenditures under the new Medicare program. Those above the dotted line lose from buying the insurance because the cost of the premium, deductible, and co-insurance payment would exceed the cost of their drugs in 2006.

This site has a graph of gains an losses for prescription drug spending.

http://www.epinet.org/content.cfm/webfeatures_snapshots

iVillage Member
Registered: 03-23-2003
Sun, 11-30-2003 - 1:43pm
Thanks for the info!

iVillage Member
Registered: 03-18-2000
Mon, 12-08-2003 - 10:27am
AARP support of Medicare bill raise some members' ire.

http://www.boston.com/business/globe/articles/2003/12/08/aarp_support_of_medicare_bill_raise_some_members_ire/


Barbara Bonfield, a 67-year-old widow in Birmingham, Alabama, just received her new AARP membership card in the mail last week. Instead of opening it, she's about to send it back with a letter informing the nation's most influential and best-known senior citizens group to cancel her 17-year-long membership.


The reason: AARP's endorsement of the $400 billion Medicare prescription drug bill.


"AARP will no longer be my representative in Washington,'' Bonfield said. ``It's just a big insurance company.''


An unexpected casualty of the bitter struggle over Medicare overhaul, according to many senior citizens and lawmakers, is the credibility of AARP. With 35 million members, AARP's support of the Medicare bill was provided ``the good housekeeping seal of approval'' that helped the Bush-backed initiative prevail, said Illinois Senator Richard J. Durbincq, an Illinois Democrat.


Critics like Bonfield say AARP supported the Medicare bill in part to leverage its already lucrative ties to large health care and drug companies. Last year, AARP collected royalty revenues of around $123 million from insurance plans marketed to their members.


Dr. David U. Himelstein, a physician at Harvard Medical School, calculates AARP stands to post profits of an additional $1.56 billion over the next decade from the new Medicare prescription drug coverage market.


"The bill dumps a huge chunk of federal monies into new coverage for private insurers,'' said Dr. Himelstein. "In effect, the AARP has shamefully agreed to sell out its members in exchange for the organization's financial gain.''


Hundreds of AARP members have barraged a message board on the group's website with e-mails condemning what they say is the group's unseemly ties with the health care industry. "AARP's big money comes from insurance kickbacks -- cancel ALL your AARP insurance policies," declared one. "We have been suckered," lamented another.


AARP last week took out full-page ads in major newspapers across the country supporting the Medicare bill as the best way to deliver a prescription drug benefit, a long-held AARP goal. AARP President William Novelli said the group's endorsement was unrelated to its partnerships with health care companies.


"We have a strict wall between policy making and product marketing," Novelli said. "We're not sitting here making decisions on policy based on revenues. When the board was considering the bill, not a word was uttered about our products."


Relations between AARP and many senior citizens could worsen amid more privatization efforts. "The next battle is over Social Security," said Barbara Kennelly, president of the National Committee to Preserve Social Security and Medicare in Washington, which opposed the Medicare bill. "I hope to God AARP doesn't leave us on that one."


Added Representative John Tierney, a Massachusetts Democrat who also fought the bill: "Social Security is the next battleground. Seniors shouldn't have to worry about privatization, but obviously Novelli has sold out on it."


Formerly known as the American Association for Retired Persons, AARP was founded in 1958 by Ethel Andrus, a retired teacher and principal who died in 1967 at the age of 83. The group counts as members 35 million people age 50 years or older. Its mission statement is to fight age discrimination, promote affordable health care, and protect such programs as Social Security.


The $12.50 annual subscription fee earns AARP members services and deals on a range of items, such as cruise packages, car rentals, and credit-card accounts that offer cash-back rewards.


When Bonfield traveled to Poland and Hungary last year, she did so on an 18-day tour that included airfare, stays at five-star hotels, tour guides, and restaurant vouchers -- all for $2,500. The trip was arranged by Grand Circle Travel, founded by Andrus as a branch of AARP and popular among group members for its senior discounts.


AARP has been marketing insurance and discounted pharmaceuticals to its members since it was founded. In 1999 the group established AARP Services Inc., a for-profit subsidiary that markets Medicare supplemental insurance on behalf of such firms as UnitedHealthcare Group and Metropolitan Life Insurance Co. Its mail-order drug service saved seniors $402 million in 2003, according to the group.


The money generated by the for-profit subsidiary is invested into AARP's nonprofit operations, Novelli said.


According to AARP's financial statement, insurance-related business accounted for $162 million of its total operating revenue of $636 million. Just over half of the $46 million AARP reported in investment income came from insurance-related activity. AARP publications, including its monthly AARP-The Magazine, reaped $76 million from ad sales in 2002, the bulk to pharmaceutical and health care companies.


Much of the $400 billion allocated by the Medicare bill will finance new supplemental Medicare prescription drug coverage. It also makes public funds available for discounted pharmaceuticals, greatly expanding demand for prescription drugs.


Because the bill leaves intact laws that prohibit the purchase of cheaper drugs from abroad, pharmaceutical companies were spared the pain of stiff price competition. Nor does the bill allow the Medicare program to use its buying power to lower the price of drugs, as some had called for.


"This bill was supposed to control the price of pharmaceuticals and it has done nothing," Tierney said. "Seniors see that and they get livid."


Novelli said parts of the drug bill may actually hurt AARP profits. He said the group is just as likely to discontinue some marketing services and drug packages because the new legislation made such products and services more affordable without the need of AARP discounts. "We're thinking that at least in the short-term, the bill could have a negative impact on revenue," Novelli said.


Criticism of the Medicare bill is softening as AARP intensifies its campaign to explain why it is good legislation, according to Novelli. He also said AARP isn't ganging up with conservative Republicans to privatize Social Security, though he adds the group is not opposed to partial privatization.


Op-ed: AARP's sellout on Medicare could come back to haunt.
http://www.theolympian.com/home/news/20031208/opinion/168723.shtml

cl-Libraone

 


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iVillage Member
Registered: 04-16-2003
Mon, 12-08-2003 - 10:41am
<>

Of course drug prices will rise, drug companies were just given a blank check by the gov't. The issue of re-importation was side-stepped. I don't understand why people can't understand that this was a windfall for big business. I am disappointed that displeasure with AARP being overcome with an ad campaign. AARP has no way of avoiding a conflict of interest. They are an insurance company!

iVillage Member
Registered: 04-16-2003
Mon, 12-08-2003 - 11:29am
"The bill that President Bush will sign today is a giant windfall for the drug companies, opening up a huge new market with virtually no effort to restrain prices. It will give Medicare recipients a modest drug benefit, but at a potentially dreadful cost. The bill starts the process of undermining Medicare by turning parts of it over to insurance companies, H.M.O.'s and other private contractors."

Full text of article below:

Stalking the Giant Chicken Coop

By BOB HERBERT



n July 30, 1965, Lyndon Johnson flew to Independence, Mo., and in the presence of a smiling Harry Truman, signed the bill that created Medicare.

"No longer will older Americans be denied the healing miracle of modern medicine," said Johnson.

The growls of opposition in the background were muted. Medicare was a desperately needed program, and it grew to be a wildly popular one. But conservatives were outraged by it. Socialized medicine, they snarled. Un-American.

Truman had proposed a health care program for the elderly back in the 40's. It went nowhere. Jack Kennedy pushed it in the early 60's. Same result. It took Johnson's legislative genius and his enormous mandate from the 1964 presidential election to bring the program into being. And even then it wasn't easy.

Johnson's biographer, Robert Dallek, recalled that Ronald Reagan "saw Medicare as the advance wave of socialism, which would `invade every area of freedom in this country.' "

"Reagan," wrote Mr. Dallek, "predicted that Medicare would compel Americans to spend their `sunset years telling our children and our children's children what it was like in America when men were free.' "

Newt Gingrich ranted against Medicare in the 1990's, comparing its operations to "centralized command bureaucracies" in Moscow. And George W. Bush tried to fashion a prescription drug benefit that would require senior citizens to leave the traditional Medicare program before they could get the benefit.

After nearly four decades, during which Medicare significantly improved the health and economic conditions of the nation's elderly, this unrelenting hostility can fairly be called an obsession.

Today President Bush will sign into law a prescription drug benefit under Medicare that will introduce the first cold drafts of bitter reality to the G.O.P.'s long dream of dismantling Medicare as we've known it.

Think of Medicare as a giant chicken coop. Keep in mind that the hostile-to-Medicare Republicans control the presidency and both houses of Congress. Now you decide who the foxes and the chickens are. (Hint: we're not talking about spring chickens.)

When Lyndon Johnson and Harry Truman got together for the debut of Medicare, they were genuinely concerned about the medical needs of the nation's elderly. "These people," said Truman, "are our prideful responsibility and they are entitled, among other benefits, to the best medical protection available."

The bill that President Bush will sign today is a giant windfall for the drug companies, opening up a huge new market with virtually no effort to restrain prices. It will give Medicare recipients a modest drug benefit, but at a potentially dreadful cost. The bill starts the process of undermining Medicare by turning parts of it over to insurance companies, H.M.O.'s and other private contractors.

The drug benefit will be delivered almost entirely through private insurance plans. It would have been more efficient and cheaper to deliver it the same way other Medicare benefits are delivered. But that's not the idea. The Bush administration has mastered the art of legalized banditry, in which tons of government money — the people's money — are hijacked and handed over to the special interests.

Drug company stock prices soared with the passage of the Medicare bill, a sign that another government vault had been blown open and the big Medicare money was in play. The Republicans are not subtle about these matters. The bill, for example, specifically prohibits the government from negotiating discounts or lower drug prices, and bars the importation of cheaper drugs from abroad.

And then there's the "demonstration" project, to begin in 2010, in which Medicare will be forced in several cities to compete against private, profit-making health plans. It will be a rigged competition in that, among other things, the private plans will be heavily subsidized by Medicare money and will be able to cherry-pick the healthiest patients.

As one Capitol Hill staffer told me last week: "This is more than the camel's nose under the tent. This is like the head, the hump and everything else."

Harry Truman would be beside himself.



http://www.nytimes.com/2003/12/08/opinion/08HERB.html

iVillage Member
Registered: 03-18-2000
Mon, 12-08-2003 - 11:33am
I belong

 


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