Let’s do the math that seniors are already doing all over America. A good way to start is with another excellentWashington Post article that came out the day after the bill passed. The article “Drug Benefit’s Impact Detailed: Many Will Face Big Out-of-Pocket Costs”, does an exemplary job of clearly outlining the structure of the drug benefit.
Here’s the basic idea: the benefit covers 75 percent of drug costs up to $2,250 in spending, then provides no coverage until $3,600 in out-of-pocket cost is reached, then covers 95 percent of drug costs after that.
This sounds, if not great, quite a bit better than it actually is. Here’s why. Before you get a penny of actual coverage, you have to absorb $670 in costs ($250 deductible and a $420 annual premium); then to get coverage up to that $2,250 figure, you have to lay out an additional $500 co-pay (25 percent of the $2,000 left after the deductible). So, at that point, the beneficiary has laid out $1,170 for $2,250 in coverage–a savings of less than half (48 percent).
At this point, the no coverage “doughnut hole” kicks in. But that’s not so bad, since coverage picks up again at $3,600 in costs, so the hole is “only” $1,350, right? Wrong! It only picks up again at $3,600 inout-of-pocketcosts, notdrug costs, which is quite a bit farther down the pike. Especially since out-of-pocket costs are defined to include only the deductible ($250) and the co-pay ($500), notthe annual premium costs ($420). Thus, since the beneficiary, by this definition, has had only $750 in out-of-pockets costs on the first $2,250, he or she has to pay $2,850 more ($3,600-$750) to reach the point where additional coverage kicks in.That means from $2,250 in drug costs to $5,100 ($2,250 + $2,850) in drug costs the beneficiary gets no coverage whatsoever. At that point, the beneficiary will have paid $4,020 ($1,170 + $2,850) on $5,100 in drug costs, a savings of just 21 percent. (For a graphical representation of this sad story, seeAngry Bear’s excellent post on this issue.)
But perhaps the typical senior–who doesn’t spend quite as much--will get a better deal and feel better about the benefit? This seems doubtful. The average drug spending by Medicare beneficiaries is projected to be about $3,250 in 2006, when the benefit takes effect. Under the bill just passed, a beneficiary will wind up having to pay 70 percent of this typical drug bill.
That doesn’t sound to DR like the drug benefit seniors had in mind. The GOP apparently doesn’t understand that what made Social Security and Medicare so wildly popular with voters is that they were very good benefits and dramatically improved the lives of those affected. The drug benefit just passed doesn’t remotely meet this standard and Republicans will find, to their sorrow, that failing to meet that standard will make a huge political difference.
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