Last December Congress enacted a Medicare drug bill. Close examination of  the details of this almost 700-page law and analysis of data on the income of Connecticut’s senior citizens indicates that most people on Medicare who live in  Eastern Connecticut will receive limited benefits. And many will  lose important freedoms they now enjoy.

Most seniors with incomes more than 150% of poverty income – fully 80% of seniors in Eastern Connecticut – will have to purchase a drug insurance policy sold by an insurance company certified by Medicare.

Medicare drug insurance will cost $420 a year. (This premium will increase each year after 2006.) The first $250 in drug purchases each year will not be covered. (This amount is the deductible.)  Thus $670  in drug costs per year ($420 for insurance + $250 deductible) will be paid  by a senior citizen before she or he receives any net benefits from the drug bill. Three quarters ($1500)  of the senior’s next $2000 in drug purchases (between $250 and $2250) will be paid for by the insurance company. Put another way, a senior buying $2250 in drugs per year will receive benefits of $1500 from the insurance carrier while paying out $1170 ( $420 for insurance and $750 ($250 + $500) for drugs).

About two-thirds of people on Medicare spend up to $2000 a year on prescription drugs. 32% of Medicare participants will spend between $2000 and  $5500 on drugs. 1% will spend more than $5500.  But the Medicare drug plan pays for NONE of a person’s drug purchases between $2250 and $5100 each year, a gap of $2850. This means that the Medicare drug plan does not provide true catastrophic insurance for drug expenses, since the approximately 33% of seniors on Medicare who will spend more than $2000 and less than $5500 for  drugs  will receive NO INSURANCE REIMBURSEMENT for the first $2850 of their expenditures above the $2250 level. The 1% of seniors who buy more than $5500 in drugs will have almost full coverage of their expenditures in excess of $5100.

Suppose a senior citizen has been buying a supplementary insurance policy (a Medigap policy) which offers partial reimbursement for drug purchases not covered by Medicare. The new drug law PROHIBITS the senior from buying a Medigap policy with coverage of drug expenses  if the senior wants to obtain Medicare drug insurance.  In short, the senior can buy either policy but not both. A Hobson’s choice.

Lists of approved drugs, called formularies, are now part of health insurance plans.  Doctors can prescribe only drugs on these lists.  Suppose the formulary of a Medicare insurance company does not include a new drug or an old drug prescribed by a doctor.  Medicare drug insurance would not pay for the drug. If a senior used her OWN MONEY to buy the drug her doctor recommended,  the  amount she spent WOULD  NOT COUNT TOWARDS EITHER OF THE  DEDUCTIBLES of the Medicare plan.

The drug bill bars Medicare from negotiating for lower drug prices with all the nation’s drug companies.  If drug companies overcharge for drugs for seniors, the law does not provide for penalties. If a price charged by a drug company is found to be excessive by Medicare’s Inspector General, the price does not have to be lowered until the three-month period in which the overcharge was discovered is over. An overcharge determined on January 20 could continue until April 1. This is like being stopped for speeding by a policeman who does NOT give you a ticket and then tells you you can  continue speeding for the rest of your trip.

The majority of seniors in Eastern Connecticut  will receive very unpredictable benefits when they join the Medicare drug plan. The plan does not help the 1/3 of  seniors who will have to shoulder the crushing burden of paying for ALL of their drug purchases between $2250 and $5100 yearly.  Seniors will be denied the right to buy insurance to fill in the huge gaps in the new drug plan. Congress could and should  repeal the restrictions on the free choice citizens now have to buy supplementary drug insurance policies.

Robert Asher, Professor of History Emeritus at the University of Connecticut, has written extensively on the history of welfare state programs.