June 30, 2003 | Commentary on Health Care
The Senate is poised to add a prescription drug benefit to Medicare, the government program that covers health care costs for 40 million elderly and disabled Americans.
While this is welcome news to some seniors, there is one thing the 78 percent of seniors who already have prescription drug coverage should know: If the Prescription Drug and Medicare Improvement Act of 2003 becomes law, there will be no reason for their former employers to continue to offer prescription drug coverage.
The Wall Street Journal noted this in a June 11 editorial. "Employers who still pay for retiree drug coverage…will in turn be only too happy to pass that burden onto taxpayers." The Journal referenced a General Motors Corp. internal analysis showing GM would save $1.4 billion by dropping retiree coverage.
Why would GM, or any other company, invest in prescription drugs if it doesn't have to? Companies will be only too happy to hand over the millions of seniors they currently cover to the government. That's why the UAW and the AFL-CIO issued statements opposing this bill.
In fact, the Congressional Budget Office estimated that 37 percent of seniors who are presently covered by their employer would lose their coverage. That's 4.4 million seniors.
Healthy seniors probably won't be affected. But for sick ones, it could become a matter of life and death.
Consider the case of a woman from Michigan. For years she has suffered from arteriosclerosis (which took her right leg), osteoarthritis, high cholesterol, high blood pressure, neuropathy and diabetes. She takes 13 different medications a day. Her prescription drugs cost roughly $30,000 a year. Her husband worked 30 years in a GM factory and was a UAW member. They have had private insurance for years and are happy with it. For prescriptions, they are required to pay only the $5 co-payment per prescription. They have no monthly premiums or deductibles.
The woman's medications cost $780 a year out-of-pocket. The couple live on the husband's pension and their Social Security, so their current situation is good, but not perfect. However, if the current Senate proposal were to become law and GM were to drop retiree coverage, they would find themselves in a world of trouble.
While the Senate plan offers a generous benefit to seniors earning below 160 percent of the Federal Poverty Level, those making above that amount ($14,368 for an individual and $19,392 per couple), if dropped from their current plan, would be put in a plan that could dramatically reduce their benefits.
Under the Senate plan the Michigan couple's prescription drug costs would jump from $780 a year to $6,119, plus the $420 premium, a total increase of more than 800 percent.
Of course, many seniors take fewer and less expensive medications than this woman. But will they always? Even seniors without health problems could face a significant increase in the out-of-pocket expenses.
Under the proposed Senate plan, someone making more than 160 percent of the poverty level and needing $10,000 in prescription drugs would have to pay $4,119 plus the premiums. Considering the cost of prescription drugs and the speed at which new (more expensive) drugs are being developed, $10,000 isn't that much money. Someone needing only $5,000 in prescriptions would have to pay $2,888 plus premiums.
Attention seniors: Isn't that more than your current plan's co-pays cost? Are you willing to give up that plan? Odds are you won't be consulted when decision time comes around; at least 4.4 million seniors will simply be dropped into the new "safety net" that, for most, won't be very safe at all.
What Congress should do is design a benefit only for those who need it. Harming those who already have coverage is not the way to help those who don't.
Still don't think this is real? Still don't believe this problem exists? Think the couple mentioned above is simply an extreme case created to worry seniors unnecessarily? Well, they are real.
They are, in fact, my parents.
Could they also be your parents, or grandparents, or you someday?
Derek Hunter is a research assistant in the Center for Health Policy Studies at the Heritage Foundation.
Originally appeared in the Detroit Free Press