The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 makes sweeping changes to the Medicare Program, including phasing in a prescription drug benefit over the next two years. First, prescription drug discounts will be made available to seniors. Then, in 2006, those discounts will be replaced with a more comprehensive drug plan.
A. Discount Cards
Beginning in June of 2004, and running through December 31, 2005, all Medicare participants, except those also eligible for Medicaid, will be able to purchase a Medicare-approved prescription drug discount card. The cards, which will be issued by 28 private sponsors, are expected to provide discounts ranging from 10-25% on most medicines. Enrollment is optional, and discounts, participating pharmacies and fees will vary among the private sponsors, although the maximum annual fee is set at $30.
Low income seniors, those with annual incomes below 135% of the poverty level (135% of poverty is $12,569 for individuals or $16,862 for a couple), but who do not qualify for Medicaid, will not have to pay the $30 enrollment fee. These low income seniors may also qualify for a one-time $600 credit for prescription drug purchases.
B. Medicare Part D
The Act also establishes a new Medicare Part D for outpatient prescription drug coverage, which will go into effect on January 1, 2006. Enrollment will be optional, and coverage will be made available through Medicare-approved private plans. There will be an annual open enrollment period beginning in November, 2005, during which Medicare beneficiaries will choose their drug plan from among those available in their area (all beneficiaries will have a choice of at least two plans).
Coverage under the new plans will be based on the participant's out-of-pocket drug costs. After the participant has spent an annual $250 deductible, Medicare will pay 75% of the cost of prescription drugs until the participant's costs reach $2,250 per year. After the participant's costs exceed $2,250, there is no Medicare coverage until the participant has spent $3,600 per year. After out-of-pocket costs exceed $3,600, the participant will pay the greater of 5% of the cost of a prescription, or a copayment of $2 for generic or $5 for brand name drugs.
The participant will pay a monthly premium, which will vary among plans, but is expected to average $35, and is not considered part of the out-of-pocket costs. Annual premiums and the payment thresholds are indexed to the average per capita spending by Medicare beneficiaries for prescription drugs, and are expected to rise over time.
C. Low Income Beneficiaries
Additional help will be provided under Medicare Part D for low-income beneficiaries. Individuals with income between 135% and 150% of the poverty level (between $12,569 and $13,966 for an individual and between $16,862 and $18,736 for a couple) and limited assets ($10,000 individual and $20,000 couple) will pay a $50 annual deductible and 15% of the cost of prescription drugs until out-of-pocket spending exceeds $3,600, after which they will pay a copayment of $2 for generic and $5 for brand name drugs.
Individuals with limited assets ($6,000 individual and $9,000 couple) and income below 135% of the federal poverty level will pay no monthly premium, have no deductible, and will pay a copayment of $2 for generics and $5 for brand names ($1 for generics and $3 for brand names if income is below 100% of poverty), until out-of-pocket costs exceed $3,600, after which they will pay nothing.
This no premium, no deductible and very low copayment drug benefit will also be available to those eligible for Medicaid. However, since this new benefit will save the states the expense of providing prescription drugs to Medicare/Medicaid dual eligibles, the states will have to pay a percentage of such savings to the federal government.