Out-of-Pocket Costs and Affordability of Medicare
The Medicare Prescription Drug Benefit: Potential Impact on Beneficiaries
Research Report
John Stell, PricewaterhouseCoopers
Jack Rodgers, PricewaterhouseCoopers
November 2004
Beginning in 2006, as a result of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Medicare will offer prescription drug coverage to beneficiaries who choose to enroll in the Part D benefit. In this AARP Public Policy Institute Issue Paper, the potential impact of this benefit overall - and with respect to specific categories of beneficiaries - is examined by Jack Rodgers and John Stell of Health Policy Economics at PricewaterhouseCoopers.
For the most part, the analyses are conducted so as to be consistent with assumptions of the Congressional Budget Office. The report finds that, overall, the MMA represents a $407 billion shift in resources to Medicare beneficiaries, health plans, employers, and states over the period 2006-2013, according to CBO. The new benefit will change the spending characteristics of the Medicare population, boost utilization, lower average drug prices, and lower out-of-pocket spending for the average Medicare enrollee. Although Medicare beneficiaries, on average, receive substantial benefits from the MMA, some beneficiaries may be worse off under the new benefit. This report demonstrates that much of the potential impact of the Medicare prescription drug benefit is a function of an individual beneficiary's income, the nature of his or her current drug coverage (if any), drug spending level, and future decisions of entities that currently sponsor drug coverage for Medicare beneficiaries, particularly employers. (40 pages)
Pub ID: 2004-13