The Effects of Congressional Proposals on Prescription Drug Costs for Medicare Beneficiaries. Background on Current Prescription Drug Coverage and Spending


  • About 25 percent of Medicare beneficiaries have no drug coverage during the year, and many others have only partial coverage or have a drug plan – such as a Medigap policy – that does not negotiate price discounts on their behalf.
  • As a result, millions of seniors – including those with the least ability to afford it – pay full retail price for their prescriptions. In contrast, the vast majority of Americans who have private insurance coverage pay prices that are as much as 40 percent less for their brand-name prescriptions (as confirmed by a Clinton Administration study of drug pricing).
  • The burden of paying full retail drug prices falls hardest on those seniors with incomes between 100 and 175 percent of poverty, since they are 25 percent more likely to lack drug coverage than other beneficiaries. All told, about 4 million Medicare beneficiaries with incomes below 175 percent of poverty lack drug coverage – accounting for nearly 50 percent of those who are uninsured for their drug spending.
  • Rural beneficiaries are also at a distinct disadvantage. In non-metropolitan areas, 36 percent of beneficiaries lack drug coverage – and these 3 million seniors and persons with disabilities account for more than one-third of all the Medicare beneficiaries who are uninsured for their drug spending.
  • Nearly 90 percent of Medicare beneficiaries fill at least one prescription per year, but the extent of their drug spending varies. In 2005, when a full Medicare drug benefit would take effect, over 50% of Medicare beneficiaries are projected to use less than $2,000 worth of drugs. But about 10% are projected to have costs over $5,000.
  • The Congressional Budget Office (CBO) now projects that Medicare beneficiaries will use about $1.8 trillion worth of drugs between 2003 and 2012. About $1.1 trillion will be paid by third parties (including employers, state governments, and Medicare+Choice plans) and about $700 billion will be spent out-of-pocket by beneficiaries.

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