The 2nd HPD report - Health Policy Monitor

Increased privatization
of Medicare
The “doughnut
hole”
Low-income
seniors and
seniors with high
drug expenditure
will benefit
As emphasis is put on increased privatization of Medicare and
increased competition in the Medicare program, another possibility
consists of a private health plan. Incentives such as tax credits
or reduced premiums encourage individuals to choose this type
of coverage.
The full drug benefit does not take effect until 2006. To bridge
the gap, from 2004 to 2006 Medicare beneficiaries may purchase
a drug discount card that is projected to provide savings of about
15 percent on the price of medications.
Under extended Medicare coverage, seniors would pay an
estimated annual deductible of €196 and monthly premiums of
€27. Medicare would cover 75 percent of annual drug costs between
€196 and €1,762 and then provide catastrophic coverage (95
percent paid by Medicare) for drug costs above €3,994. For drug
expenditures between €1,762 and €3,994—the so called doughnut
hole—individuals must cover 100 percent of the cost.
Private plans, retiree plans and the new Medicare Advantage
plans offer an array of different conditions with financial incentives
for the supplier, the customer or both.
The legislation includes subsidies for low-income seniors,
competition between traditional fee-for-service Medicare and
private health plans, incentives for private health plans and employer
plans, and tax-preferred health savings accounts. People
with very low income or very high drug costs are expected to benefit
from the reform bill. For others, the bill is more or less disappointing.
Idea
Pilot
Policy Paper
Legislation
Adoption
Evaluation
Bipartisan issue The issue of modernizing Medicare to include a prescription drug
benefit has been on the agenda for years. It is a bipartisan issue;
both parties have put forth plans. Many other stakeholders such
as advocacy groups for the elderly, academics, health policy experts
and the pharmaceutical industry, have been involved in
shaping proposals.
The plan initially proposed by President Bush, which extended
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