S PROPOSED PRESCRIPTION DRUG BENEFIT
s plan to modernize Medicare would include a new, voluntary Medicare drug benefit. Called Medicare
Part D, it would offer all beneficiaries, for the first time, access to affordable, high-quality prescription drug
coverage beginning in 2002. This benefit would cost the Federal government about $118 billion from 2000 to 2009.
It would be fully offset, primarily through savings and efficiencies in Medicare and, to a small degree, from the
surplus amount dedicated to Medicare.
Meaningful coverage. Beginning in 2002, beneficiaries would have the option of participating in the new
Medicare Part D program. It would have:
No deductible -- coverage begins with the first prescription filled and
50 percent coinsurance, with access to discounts negotiated by private pharmacy managers after the limit is
The benefit would be limited to $5,000 in costs ($2,500 in Medicare payments) in 2008. It would phase it a $2,000
for 2002-2003; $3,000 for 2004-2005; $4,000 for 2006-2007; and $5,000 in 2008 (indexed to inflation in
Affordable premiums. Beneficiaries who opt for Part D would a pay separate premium for Medicare Part D --
an estimated $24 per month in 2002, and $44 per month in 2008 when fully implemented. This premium represents 50
percent of program costs. Enrollment would be optional and, after an initial open enrollment for all beneficiaries
in 2001, would occur when a beneficiary becomes eligible for the program or when they transition out of
employer-based coverage. Premiums would generally be deducted from Social Security checks.
- Low-income protections. Beneficiaries with income up to 150 percent of poverty ($17,000 for a couple)
would pay no Part D premium. Those with income below 135 percent of poverty ($15,000 for couples) would pay no
premiums or cost sharing. This assistance would be administered through Medicaid, with the Federal government
assuming all of the premium and cost sharing costs for beneficiaries with incomes above poverty.
Private management. Beneficiaries in managed care plans would continue to receive their benefit through
their plan. For enrollees in the traditional program, Medicare would contract with numerous private pharmacy
benefit managers (PBMs) or similar entities. Medicare would use competitive bidding to award contracts for drug
management. The private managers would use the latest, effective cost containment tools, drug utilization review
programs, and meet quality and consumer access standards. No price controls would be imposed.
Incentives to develop and retain retiree coverage. Employers that choose to offer or continue retiree
drug coverage would be provided a financial incentive to do so.