New Medicare Law Gives Seniors Choices

Elderly patients are about to confront numerous and sometimes difficult choices as a result of the most far-reaching changes to Medicare (search) in four decades, including a new prescription drug benefit.

Beginning in 2006, seniors who want the optional drug benefit will have to choose whether to enroll in a stand-alone drug plan or move from traditional Medicare to a managed care plan that offers drug and other benefits not covered by traditional Medicare.

They'll be making comparisons among plans that do not necessarily offer precisely the same coverage and if they don't enroll in the drug program right away, they'll pay a penalty to enroll later.

Still, President Bush sought to reassure Medicare recipients on Monday that the government would provide detailed explanations of their choices and he said the new drug benefit "will save our seniors from a lot of worry."

The government will spend nearly $400 billion over the next 10 years to subsidize prescription drug coverage, which begins January 2006. At the same time, the government will encourage insurance companies to offer private plans to millions of older Americans who now receive health care benefits under terms fixed by the federal government.

"Medicine has changed but Medicare has not - until today," Bush said at a signing ceremony for the bill, the president's top domestic priority. "Our seniors are fully capable of making health care choices, and this bill allows them to do that."

The president spoke in front of a large blue banner with a prescription sign and the words, "Keeping Our Promise to Seniors."

Republicans hailed the signing as a political triumph they could use in next year's election to neutralize Democrats' historical advantage on issues regarding the elderly.

"Democratic leaders have lashed out at us, at the president and AARP (search)," House Majority Leader Tom DeLay of Texas said. "But Democrats have no one to blame but themselves for their abject failure on health care. We wanted a bill, they just wanted an issue, and now the American people know who took their concerns seriously."

Democrats pledged to fight in the Republican-controlled Congress for changes in the law, principally for measures to bring down the price of prescription drugs. "President Bush and the Republicans in Congress missed a historic opportunity and rammed through a cruel hoax that does nothing to reduce the high costs of prescription drugs," said House Democratic leader Nancy Pelosi of California.

Republicans wrote into the new law a provision expressly prohibiting the government from using its vast purchasing power to control drug prices. Democrats in the House and Senate are backing legislation to authorize the government to negotiate drug prices with pharmaceutical companies.

The first tangible result of the Medicare law will be prescription drug discount cards (search) that the president said would take effect in June. He said seniors will receive a mailing in the spring to explain the card, which will cost no more than $30 a year. It will offer discounts that Bush said will range from 10 percent to 25 percent off retail prices. Critics say the promise of savings is wildly inflated.

The discount drug card will offer the administration a test run of how well it can explain seniors' choices.

The cards will be sponsored by insurance companies, wholesale and retail pharmacies and pharmacy benefit managers that now administer drug insurance programs for companies and the government.

The cards are likely to offer different discounts for different drugs made by different companies, so seniors will have to choose the drug card that meshes best with their prescription medicines.

Bush also sought to allay seniors' fears that they would be forced to change health plans. "If you don't want to change your current coverage, you don't have to change," Bush said.

But that option may not exist for some seniors. The Congressional Budget Office (search) estimates that 2.7 million retirees will lose the drug coverage they now receive from former employers, although other projections are that a much smaller number will have their existing private benefits dropped.

Seniors who now rely on supplemental insurance to defray the cost of prescription drugs can choose to keep those so-called Medigap (search) policies instead of signing up for the new benefit, the White House said. However, seniors will not be allowed to enroll in both a Medigap plan and the new prescription drug plan.

Some current Medicaid beneficiaries - among the poorest of seniors - could see the number of different drugs now available to them restricted once they are shifted to the Medicare plan, several health analysts said.

However, the new Medicare plan will pay all drug costs of seniors with incomes below $12,123 - $16,363 for a couple - as long as their savings do not exceed $6,000. There are declining subsidies for people with slightly higher incomes.

After paying for the first $250 in prescriptions, other seniors will be responsible for 25 percent of the next $2,000 in drug costs. Between $2,250 and $5,100 in drug costs, the government will pay nothing. Over $5,100 the government pays 95 percent of prescription costs. That works out to $3,600 in annual out-of-pocket drug costs before the 95 percent coverage kicks in.

The monthly premium for the drug plan is estimated to be a national average of $35 in 2006. But the exact shape and cost of the drug benefit also could differ from one region of the country to the next. And nothing in the law precludes private insurers from offering more generous but also more costly plans.