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AARP Sends Letters to Senators Regarding Prescription Drug Benefit in Medicare

AARP is pleased with the progress that the Senate has been making to add a prescription drug benefit to Medicare. Relief from the high cost of drugs is long overdue, and our members expect and deserve a bill this year. The Finance Committee bill holds the promise of breaking the legislative stalemate that has led to inaction over the past several years.

We commend you for a number of important components of the pending bill. Your bill would provide a voluntary prescription drug benefit, with equal drug benefit subsidies, to all beneficiaries, whether they choose traditional fee-for-service or enroll in one of the new private plan options. The bill would provide significant additional help for low-income beneficiaries, as well as protection for those with the highest drug costs. We also applaud your decision to avoid payment systems that would raise premiums for those who choose to stay in traditional Medicare, or to reduce prescription drug benefits based on income.

Much has been accomplished, but more needs to be done. We urge you to address a number of issues remaining, primarily issues of affordability and stability.

AFFORDABILITY

Coverage Gap

The ultimate test for the bill is not whether it will achieve enough votes, but whether it will provide needed relief for Medicare beneficiaries. Of primary concern is that the coverage be affordable and attractive enough to ensure enrollment of a large enough pool of beneficiaries to allow the program to work. Attracting only those with the highest drug costs will not create a program that will be sustainable over time. Our research has consistently shown us that our members’ enrollment decisions are influenced by the adequacy and complexity of the benefit. Chief among their concerns is the benefit gap in coverage. We appreciate the efforts made in committee to partially address these concerns. However, AARP believes we should finish the job. The benefit gap is not good policy, is unnecessarily confusing, and will prove to be a disincentive to enrollment. We urge you to further close this coverage gap.

Indexing

A second key affordability issue is that benefit levels are indexed to the cost of drugs. Drug costs have been skyrocketing at levels high above general inflation. Failure to contain the costs of drugs in the future means that the benefit will rapidly become more unaffordable over time. For example, the initial deductible amount of $275 in 2006 is projected to rise to over $500 by 2013. As you well know, older Americans’ cost-of-living adjustments are linked to the general inflation rate, and they will fall swiftly behind a benefit indexed to drug costs. We urge you to index the benefit level to another measure more closely related to the growth in beneficiaries’ ability to pay to ensure that the coverage will remain affordable over time.

Low-Income

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