DISTURBING TRUTHS AND DANGEROUS TRENDS:
The Facts About Medicare Beneficiaries and Prescription Drug Coverage
This report describes the inadequate and unstable nature of the prescription drug coverage currently available to
Medicare beneficiaries. Prescription drugs have never been more important, but the people who rely on them most
-- the elderly and people with disabilities -- increasingly find themselves uninsured or with coverage that is
becoming more expensive and less meaningful. This report shows that the accessing essential prescription drugs is
not only a problem for the millions of Medicare beneficiaries without any insurance -- it is an increasing challenge
for beneficiaries who have coverage. Key findings of the report include:
Prescription drug coverage is good medicine.
Part of modern medicine. Prescription drugs serve as complements to medical procedures, such as
anti-coagulants, used with heart valve replacement surgery; substitutes for surgery, such as lipid lowering
drugs that reduce the need for bypass surgery; and new treatments where there previously were none, such as
medications used to manage Parkinson's disease. In addition, as our understanding of genetics grows, the
possibility for breakthrough pharmaceutical and biotechnology will increase exponentially.
Medicare beneficiaries are particularly reliant on prescription drugs. Not only do the elderly and people
with disabilities have more problems with their health, but these problems tend to include conditions that respond
to drug therapy. Not surprisingly, about 85 percent of beneficiaries fill at least one prescription a year for
such conditions as osteoporosis, hypertension, myocardial infarction (heart attacks), diabetes, and depression.
The lack of drug coverage has led to inappropriate use of medications which can result in increased costs and
unnecessary institutionalization. Recent research has determined that being uninsured leads to significant
declines in the use of necessary medications. The consequence of inappropriate and underutilization of
prescription drugs has also been found to double the likelihood that low-income beneficiaries entering nursing
homes. One study concluded that drug-related hospitalization accounted for 6.4 percent of all admissions of the
over 65 population and estimated that over three-fourths of these admissions could have been avoided with proper
use of necessary medications.
About 75 percent of Medicare beneficiaries lack decent, dependable, private-sector coverage of prescription drug
Only one-fourth of Medicare beneficiaries have retiree drug coverage, which is the only meaningful form of
Over three-fourths of beneficiaries lack decent, dependable. At least one-third of Medicare beneficiaries
have no drug coverage at all. Another 8 percent purchase Medigap with drug coverage -- but this coverage is
frequently expensive, inaccessible and inadequate for many Medicare beneficiaries. About 17 percent have coverage
through Medicare managed care. Given the projected leveling off of managed care enrollment and actual declines in
the scope of managed care drug benefits, this source of coverage is unstable. Drug coverage in managed care can
only be assured if it becomes part of Medicare's basic benefits and is explicitly paid for in managed care rates.
The remaining 17 percent are covered through Medicaid, Veterans' Affairs and other public programs.
Private trends: Decline in coverage and affordability.
The proportion of firms offering retiree health coverage has declined by 25 percent in the last four years.
Retiree health coverage is declining substantially because many firms previously providing it are opting to drop
their coverage. The decline was more pronounced among the largest employers (greater than 5,000 employees), over a
third of whom dropped coverage in this period.
Medigap premiums for drugs are high and increase with age. Medigap premiums vary widely throughout the
nation but are consistently two to three times higher than the Medicare premium proposed by the President.
Moreover, unlike the President's proposal, premiums substantially increase with age as virtually every Medigap
plan "age rates" the cost of the premium. This means that just as beneficiaries need prescription drug coverage
most and are the least likely to be able to afford it, this drug coverage is being priced out of reach. This cost
burden will particularly affect women, who make up 73 percent of people over age 85.
Public drug coverage trends: managed care benefits reduced.
The value of Medicare managed care drug benefits is declining. Nearly three-fifths of plans are reporting
that they will cap prescription drug benefits below $1,000 in the year 2000. This is part of a troubling trend of
plans to severely limit benefits through low caps. In fact, the proportion of plans with $500 or lower benefit
caps will increase by over 50 percent between 1998 and 2000.
Participation by Medicaid eligible populations remains low. Millions of Medicare beneficiaries under 75
percent of poverty (about $6,000 for a single, $8,500 for a couple) are eligible for Medicaid prescription drug
coverage, but the participation rate is only about 40 percent. This contrasts with an almost 100 percent
participation rate in Medicare Part B for beneficiaries. Inadequate outreach and welfare stigma contributes to
these low participation levels and raise serious questions about the feasibility and advisability of using the
Medicaid program to provide needed coverage for a population at higher income levels.
Millions of beneficiaries have no drug coverage.
At least 13 million Medicare beneficiaries have absolutely no prescription drug coverage. The number of the
uninsured is not concentrated among the low income. In fact, the income distribution of uninsured Medicare
beneficiaries is almost exactly the same for beneficiaries at all income levels.
More than half of Medicare beneficiaries without drug coverage are middle class. Over 50 percent of Medicare
beneficiaries without drug coverage have incomes in excess of 150 percent -- an annual income of approximately
$17,000 for couples. This clearly indicates that any prescription drug coverage policy that limits coverage to
below 150 percent of poverty, as some in Congress suggest, will leave the vast majority of the Medicare population