NCPA - National Center for Policy Analysis

Neediest Wouldn't Benefit From Clinton's Medicare Drug Entitlement

July 27, 1999

President Clinton's proposed prescription drug entitlement for people on Medicare would cost beneficiaries $110 billion in premiums over 10 years, according to the White House, while the federal government would kick in $118 billion (or $168 billion according to the Congressional Budget Office). Experts say that while the president talks about helping the poor, he really is creating a middle-class entitlement.

The Medicare add-on would pay half of all prescription drug costs, with no deductible, up to a maximum of $2,000 in expenses (i.e., the government would pay as much as $1,000) beginning in 2002, growing to a maximum of $5,000 in expenses (or $2,500 for the government) by 2008.

Participating seniors would pay $24 per month, increasing incrementally to $44 per month by 2008. The administration expects 31 million seniors eventually would enroll, although about 65 percent of Medicare beneficiaries have some prescription drug benefits now. 

Ironically, the plan gives little help to seniors with low or high drug costs. But it's ideal for someone in the middle.

  • Since seniors initially will pay $24 per month, or $288 per year, in premiums to get the benefit, they won't gain unless they have more than $576 in drug costs.
  • And the total benefit is only $712 ($1,000 benefit minus $288 in premiums).
  • On the other hand, since the government will initially pay only $1,000 toward each senior's prescription drug costs, those with catastrophic costs will get little help.

The president's plan also calls for paying the premiums and copayments for those below the poverty level. But low-income seniors already qualify for Medicaid as well as Medicare -- and Medicaid provides drug coverage for 88 percent of them.

Source: Merrill Matthews Jr. (vice president of domestic policy), "Tough Questions for President Clinton's Prescription Drug Benefit," Brief Analysis No. 301, July 26, 1999, National Center for Policy Analysis, 12770 Coit Rd., Suite 800, Dallas, Texas 75251, (972) 386-6272.

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