As members of Congress probe who in government knew how much and when about the cost of the Medicare prescription drug benefit, a healthcare consulting and actuarial firm reports on its own analysis of the program, concluding that plan beneficiaries will be footing two-thirds of the bill for their drugs.
Milliman USA reports in a recent newsletter that in 2006, the cost in additional Medicare taxes for the drug benefit will be $110 for every American man, woman and child, with that per-capita cost rising to $511 by 2016.
The soaring cost estimate is based on the assumption that the current provision in the law barring the government from negotiating volume discounts with the drug industry remains in place, according to Steve Kaczmarek, a consulting actuary with Windsor, Conn.-based Milliman.
By 2006, plan beneficiaries will end up paying 66% of the cost of the program through their $420 annual premiums, $250 deductibles and other out-of-pocket copayments. Member contributions are indexed to per-capita spending on pharmacy and will rise in the future, Kaczmarek said.
Under the program, which will rely on private insurers to administer the benefit package, for the next $2,000 above the deductible the plan will pay 75% of the cost of a prescription while the beneficiary will pay 25%. Above $2,250, the controversial "doughnut hole" of the plan, an enrollee will pay 100% of drug costs up to $5,100.
Milliman estimates only one in seven beneficiaries will use the catastrophic coverage on the other side of the doughnut hole, where a plan will pay 95% of drug costs in excess of $5,100.
On the other end, about one in six plan enrollees will not incur costs above the $250 deductible and the "break-even" drug expense at which senior citizens will receive as much financial assistance from the plan as they pay into it will be $810. Milliman estimates 30% of beneficiaries will not reach this break-even point.
"That percentage, we would assume, will remain constant over the years because all of these costs are indexed," said Kaczmarek, who likened the program to Social Security. "People buy in and pay the $35 dollars, it's likely they will get something out if it, but a subset won't get back an amount equal to their premium."
Milliman estimates the rise in cost of prescription drugs per beneficiary, and the indexed program cost components, will rise at 15% per year after 2006, driven by an aging population, greater longevity and the cost of new drugs, Kaczmarek said.