Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



Press Release


Jun 01, 2004

Beneficiaries with Chronic Conditions, Modest Incomes Still Face Stiff Cost Burdens Under New Medicare Drug Law

New York City, June 1, 2004—The new Medicare prescription drug law will provide much-needed help to many, especially beneficiaries with low incomes, but it's unclear whether most patients will benefit in the long run, a new Commonwealth Fund report says. The drug benefits provided under the measure will not grow with beneficiaries' needs, and other program changes that could prove unworkable or place some beneficiaries at risk will create added costs, the report says. In the meantime, reliance on standalone private drug plans could saddle beneficiaries remaining in traditional Medicare with higher costs. In How Beneficiaries Fare Under the New Medicare Drug Bill, Marilyn Moon of the American Institutes for Research analyzes the complexities of the Medicare Prescription Drug Improvement and Modernization Act (MMA), highlighting potential pitfalls for beneficiaries. The lack of aid for those with incomes just over the limit for low-income assistance will need close monitoring to determine their effect on beneficiaries over time, Moon says. Additional legislation and carefully crafted regulations will be key to ensuring the success of the benefit, she concludes. IMPORTED: www_commonwealthfund_org__usr_img_moon730_01.gif "The MMA is the largest benefit expansion in Medicare's history, and creates major changes in the program's structure," said Moon. "There is a great deal of uncertainty about whether the benefit is well-designed to provide beneficiaries with access to needed medications while providing protection from high out-of-pocket costs." Chronically Ill Will Bear Greatest Burden of Coverage Gap
About two in five (42%) Medicare beneficiaries have drug expenditures of more than $2,251 a year and will therefore be affected by the coverage gap, or "donut hole," that occurs between $2,251 and $5,100 in total drug spending. Many affected by the gap are expected to be those with chronic conditions: about three-fourths of Medicare beneficiaries have two or more chronic conditions. Those with chronic conditions—which can require taking several drugs a day at a cost of $1,000 or more per year per drug-are likely to have drug expenses in the $3,000–$5,000 range. "The gap in coverage in the benefit occurs just where the need is most acute for the chronically ill," said Commonwealth Fund President Karen Davis. "Previous research has shown that Medicare beneficiaries will skip drugs when cost burdens become too high relative to income, leading ultimately to more serious health problems and higher health care costs when conditions aren't managed appropriately." IMPORTED: www_commonwealthfund_org__usr_img_moon730_02.gif The "gap" in coverage would escalate significantly over time due to indexing, making the gap something of a "chasm." The $3,600 gap is expected to rise to $6,400 in 2013-a 78 percent increase. In contrast, eligibility for low-income protection will increase at a much smaller rate, by only about half that amount. Near-Poor Will Face High Cost Burdens
The low-income benefit provisions are substantial for those with incomes under 150% of poverty, but anyone with an income slightly above that will face out-of-pocket costs that are high relative to income. A beneficiary who spends $3,000 a year on drugs and whose income is $15,400 would pay about 12 percent of annual income on out-of-pocket costs for drugs even if they purchased the coverage. Asset tests will also limit eligibility for low-income benefits. Maximum total assets permitted for low-income assistance are $6,000 for a single adult and $9,000 for couple. The Congressional Budget Office estimates that 1.8 million individuals under 150% of poverty will be excluded because of the asset test, and another 700,000 will receive lower subsidies.

Publication Details


Jun 01, 2004