Democratic Medicare Drug Reforms Could Save Seniors Billions of Dollars

Democratic members of Congress have proposed reforms of the Medicare drug benefit that could save the average senior almost $500 per year and eliminate the donut hole, without any increased costs to the taxpayer.

A new report released by Rep. Waxman finds that under Democratic proposals:

• Almost 14 million Medicare beneficiaries could save over $60 billion in premiums, copays, and other out-of-pocket drug costs. Democrats have proposed allowing the Medicare program to negotiate for lower drug prices, which could reduce prices by 25% or more. There are 8.7 million Medicare beneficiaries nationwide enrolled in Medicare drug plans who pay their own premiums and copays, and they could expect average savings of almost $500 annually if Medicare negotiated for 25% lower drug prices. The total savings over the next decade for these beneficiaries would be $61 billion. If beneficiaries enrolled in Medicare HMOs received similar discounts, the total savings over the next decade would be $96 billion.
• Over six million Medicare beneficiaries could avoid the “donut hole.” Drug benefits under standard Medicare drug plans end once beneficiaries have used $2,250 worth of drugs and do not begin again until they have used over $5,100 worth of drugs. The latest estimates indicate that 6.2 million beneficiaries nationwide will hit the donut hole this year, resulting in average out-of-pocket costs of $1,700 per beneficiary. Democratic reform proposals in Congress would provide enough savings to eliminate or significantly reduce the size of the donut hole.
• Over one million Medicare beneficiaries could avoid hundreds of dollars in penalties. Enrollment in the Medicare drug program has been well below expectations, with over four million Medicare beneficiaries failing to sign up with a Medicare drug plan prior to the May 15, 2006, deadline. An estimated 1.1 million of these beneficiaries are now subject to lifetime penalties that could cost each individual almost $500 to over $1,000 over the next decade. Democratic reform proposals would give these beneficiaries an opportunity to participate in a Medicare drug plan without these unnecessary penalties.