The new prescription drug benefit will take effect in January 2006, when the typical senior will have an estimated $1,891 in yearly drug expenses (Congressional Budget Office estimate of median per capita drug spending).
As Medicaid eligibility requirements vary by state, the calculator does not take into account reduced co-pays for these beneficiaries. Out-of-pocket costs for Medicare beneficiaries who are also fully eligible for Medicaid are estimated to be close to half of the amounts shown above.
The standard drug benefit includes:
- $35 monthly premium
- $250 annual deductible
- Beneficiary pays 25% of costs for drug spending between $250 and $2,250,
- Up to 25% savings on drug spending between $2,250 and annual out-of-pocket maximum of $3,600.
- After $3,600 in out-of-pocket costs the beneficiary pays the greater of 5% co-insurance or co-pays of $2 for each generic prescription and $5 for each brand prescription.
In 2006, low-income beneficiaries will pay no premiums and will receive extra aid with drug costs. Singles with incomes below $10,294 (couples with incomes below $13,250) who are fully eligible for Medicaid will pay a $1 co-pay per generic prescription and $3 co-pay per brand prescription. Singles with incomes below $13,897 (couples with incomes below $17,888) will pay co-pays of $2 per generic and $5 per brand name prescription. Beneficiaries with incomes between $13,897 and $15,441 (or between $17,888 and $19,875 for a couple) will pay a deductible of $50, 15% co-insurance until their annual out-of-pocket spending reaches $3,600, and then co-pays of $2 for each generic and $5 per brand prescription for the remainder of the year. These individuals will also receive sliding scale assistance on their premiums
The calculator assumes additional savings to beneficiaries of 20% resulting from bulk purchasing of prescription drugs, compared to the retail prices many seniors face today as individual cash purchasers (based on historical experience and Congressional Budget Office estimates). The calculator is based on estimated average drug prices in 2006 and assumes beneficiaries use equal numbers of generic and brand prescription drugs.
The calculator does not provide a cost comparison for those Medicare beneficiaries who currently have prescription drug coverage from other sources such as employer-based plans for retirees.
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