The $400 billion compromise plan to expand Medicare to cover prescription drugs, now under consideration in the House and Senate, would cut drug costs by about one-third for the average senior and would provide medicines virtually free to millions of low-income seniors, according to details released yesterday by Congress.
But the insurance plan would provide little relief for about 3 million people with moderate assets and incomes near the poverty level and would cost seniors with drug expenses under $835 a year more than they currently spend.
"For those who have no coverage, the bill could offer significant relief," said Tricia Neuman, director of the Medicare policy project at the Kaiser Family Foundation. "But there may be others who have drug costs in the middle range who may be disappointed."
The bill to authorize the biggest expansion of Medicare in the 38-year history of the program still faces a huge hurdle in Congress as both conservatives and liberals attacked key aspects yesterday. Particularly controversial is a proposal to spend $12 billion to foster competition between private health plans and Medicare. But the plan gained momentum yesterday when the AARP threw the support of its 35 million members behind the compromise, calling it "a historic breakthrough and important milestone in the nation's commitment to strengthen and expand health security for its citizens."
About three-quarters of the 40 million seniors and disabled people in Medicare currently have drug coverage through their former employers, the Medicaid program for the poor or through private insurance plans, but much of that coverage is spotty and many employers are cutting back on health plans for retirees. The compromise includes an approximately $88 billion subsidy to encourage employers not to drop coverage, but even supporters suggest as many as 16 percent could still lose their private coverage.
A typical senior without drug coverage will spend $1,356 on drugs this year, according to the Kaiser Family Foundation. The new Medicare benefit would save that senior $391, or 29 percent. For those with drug coverage, whose insurance and out-of-pocket drug costs will average $2,322 this year, the discount would be $824, or 35 percent. "For the average middle-class citizen, the benefit is pretty small," said Stephen Crystal, chair of the division on aging at Rutgers University.
Most seniors would pay a monthly premium of $35 and have an annual deductible of $275. Once the deductible is met, they would pay 25 percent of drug costs up to $2,200. Enrollees would be responsible for the full cost of drugs between $2,200 and $3,600 out of pocket, but pay only 5 percent of annual costs above that.
Participation in the program would be voluntary and would begin in 2006, if Congress approves the plan and President Bush signs it into law. Seniors would have to choose a private insurer to provide drug coverage, either through a Medicare HMO or through a stand-alone drug plan. The actual benefits could vary slightly as long as the overall value is the same.
"There's lots of complexity," said Judy Feder, dean of the Georgetown University Public Policy Institute. "It's going to be a tough road for customers to navigate."
The plan subsidizes care for low-income seniors, requiring those living below the poverty level -- with annual incomes of $8,980 or less -- to pay only $1 per prescription for generics and $3 for brand name as long as they have fewer than $6,000 in assets.
"Anybody with a modest savings account or burial plot or variety of other household items is going to be left totally out in the cold," said Ron Pollack, executive director of Families USA. "About 3 million people in greatest need of assistance will not receive any help."
The Medicare program would take responsibility for covering qualifying seniors who are now on Medicaid, the state-federal insurance program for the poor. But states wouldn't see a substantial savings, since they would be required to provide the federal government with about 75 percent of what they currently pay for seniors' drugs. States would be barred from providing additional drug benefits to these beneficiaries, a move Senator Edward Kennedy, the Massachusetts Democrat, said would hurt about 6 million seniors.
If the compromise passes, seniors could begin to get a small discount on drugs next year with a Medicare card that would entitle them to between 15 and 25 percent off at the pharmacy. Low-income seniors would get $600 toward drug costs.
Beyond the drug benefit, the compromise plan makes a number of other changes to Medicare. Congress would have to step in to control costs if general tax revenues are needed to cover more than 45 percent of Medicare spending. General revenues now cover about 41 percent. House members and senators who negotiated the compromise -- all but two were Republicans -- said the proposals would help contain growing costs of the Medicare program. But Kennedy yesterday called the moves "an untried, untested program that is designed to undercut Medicare."
All seniors who opt for coverage of doctor's bills -- through the "Part B" program -- would face a yearly premium increase of about 10 percent. And for the first time, seniors with incomes over $80,000 a year would face higher premiums for Part B than other enrollees, which Kennedy's office estimates would affect about 2 million people.
Seniors would get some other new health benefits, including a free physical when they first enroll, preventive screening for diabetes and cardiovascular disease, and more coordinated coverage for those with chronic illnesses.
The plan also cuts reimbursements to cancer doctors who administer chemotherapy in their offices, changing a payment system that some said inflated those payments significantly. Separately, it blocks a proposed 4.5 percent cut in reimbursements to all doctors and provides them a 1.5 percent increase next year and in 2005.
It also allows importation of drugs from Canada, but only if the Department of Health and Human Services certifies the safety of that move. The department has so far refused to do so.
Alice Dembner can be reached at Dembner@globe.com.