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Letter by AARP CEO Bill Novelli to Congress Concerning Prescription Drug Benefit in Medicare

The House bill would -- for the first time in the program's history -- vary the Medicare benefit based on income. Specifically, the level of the prescription drug catastrophic cap would be higher for those with incomes above a specific threshold. The Senate bill does not include such a provision. The argument that beneficiaries with higher incomes can afford to pay more for their benefits fails to recognize that individuals with higher incomes have already paid more through higher Medicare payroll taxes during their working lives -- and many continue to contribute to Medicare through general tax revenues. Further, no insurance plan for individuals under the age of 65 -- including plans for Members of Congress -- varies benefits by income. The House bill, by reducing benefits for those with higher incomes, would create a disincentive for higher income beneficiaries to enroll in the program, further weakening the risk pool.

Medicare must remain a program in which everyone who pays in receives the benefit. Altering the level of the benefit based on beneficiary income would erode the universal nature of the program.


We are encouraged that both the House and Senate bills would provide additional assistance to low-income beneficiaries. We urge the conferees to improve these provisions further. The House bill includes all Medicare beneficiaries -- including "dual eligibles" -- in the prescription drug benefit. The Senate bill would require dually eligible beneficiaries to continue to rely on whatever Medicaid drug benefit is provided in their state, rather than the Medicare benefit. AARP believes that all Medicare beneficiaries should have access to the Medicare drug benefit and that states should be able to wrap-around the Medicare benefit. To do otherwise would set a bad precedent that would result in a Medicare benefit not being available to all beneficiaries. The universality of the benefit is another lynchpin of the Medicare program and should not be altered.

Both bills have made improvements in the level of the assets test imposed on low-income beneficiaries, however we believe that eligibility for this assistance should not be limited by an assets test that could prevent otherwise low-income beneficiaries from the benefit of reduced cost sharing.

The House bill does not provide any coverage for low-income beneficiaries in the "doughnut hole." This means that low-income beneficiaries could find themselves with no protection at a time when they need it most. A primary strength of these bills lies in the low-income protections and we believe that costs must be covered without gaps in order to ensure that low-income Americans will be able to afford the drugs they need to stay healthy.


Coverage Gap

The ultimate test for a successful Medicare prescription drug benefit is whether it will provide needed relief for Medicare beneficiaries. Coverage needs to be affordable and attractive enough to ensure enrollment of a large enough pool of beneficiaries so that the program will work. Attracting only those with the highest drug costs will render the program unsustainable over time.

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