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July 8, 2002

Study: Retiree drug costs will remain steep under House plan

By Ron Sauder

Contrary to widespread expectations of substantial relief in the offing, Medicare beneficiaries, overall, still will have to pay 70 percent of the costs of their prescription drugs under the terms of the Medicare drug plan passed by the House of Representatives on June 28.

Moreover, 6.8 million of the elderly and disabled Americans who receive Medicare benefits will have to pay the full catastrophic limit of $3,700 a year for prescription drugs, according to an analysis by Kenneth Thorpe, chair of Health Policy and Management in the Rollins School of Public Health.

Additionally, 11.7 million Medicare recipients will have to pay an average of $2,200, Thorpe said, using Congress-ional Budget Office projections for the year 2005, when the House-approved plan would go into effect. The scale of those out-of-pocket expenses may be surprising to some retirees who assume from the news headlines that Congress has moved halfway toward relief of their prescription drug cost burden, one of the dominant issues in the 2000 presidential campaign.

“Much of the debate and rhetoric over the Medicare drug legislation has led many seniors to expect substantial financial relief from the high out-of-pocket expenses for their prescription drugs,” Thorpe said. “For many, the reality of the House prescription drug bill may indeed constitute a major shock. Indeed, many Medicare beneficiaries who incur high drug expenses may expect that the House-passed bill will reduce substantially their out-of-pocket spending. Yet, as the analysis reveals, this is not likely to be the case. Indeed, nearly 50 percent of Medicare beneficiaries will still face annual out-of-pocket liabilities that average over $2,750 per year.”

The Senate currently is considering its own approach to the issue. Whatever bill it passes will have to be reconciled with the House version.

Thorpe is an experienced health policy analyst who served from 1993–95 as deputy assistant secretary for health policy in the U.S. Department of Health and Human Services.

In that capacity, he coordinated all financial estimates and program impacts of President Bill Clinton’s health care reform proposals.

Thorpe also directed the administration’s estimation efforts in dealing with Congressional health care reform proposals during the 103rd and 104th sessions of Congress. He has held faculty appointments at the University of North Carolina at Chapel Hill, Harvard and Columbia.