The Medicare legislation that President Bush has said he will sign adds a prescription drug benefit to the entitlement program. But it is complicated. Seniors with relatively low drug costs won’t save anything. Seniors with midrange drug costs do OK. But the biggest savings go to seniors with large drug bills. In some cases, they will save more than 50 percent.

Discount card

Beginning in the spring, seniors will be able to buy a prescription discount card that will be endorsed by Medicare. The cards are similar to discount cards that are already available from private companies.

The cost of the cards and the amount of savings they will provide have not been determined and could vary from region to region. The price is estimated at about $30 for the card and discounts could be as much as 25 percent. Low-income seniors may qualify for a $600 credit on drug purchases.

The drug benefit

Beginning in 2006, a drug benefit will be available from Medicare or competing private insurers.

There will be a monthly premium, projected to be about $35.

There is a $250 annual deductible.

There is a 25 percent co-payment for drug costs between $250 (the amount of the deductible) and $2,250.

Seniors will be responsible for all of the costs between $2,250 but less than $5,100. After drug costs exceed $5,100, the plan pays 95 percent.

The 25 percent co-payment is capped at $500.

Seniors with annual incomes less than 135 percent of the federal poverty level and assests less than $6,000 for an individual or $9,000 for a couple – excluding a house and a car – will be eligible for reduced premiums, co-payments and deductibles. Seniors with income less than 150 percent of the poverty level also will qualify for reduced costs.

The program is voluntary. No one will be required to participate, although some seniors who currently have a drug benefit through their employer or former could see those programs dropped or altered.

Doing the math

Here are five examples of how the drug benefit will affect seniors with different annual drug costs.

Annual drug costs: $600 ($50/month)X

Annual premium: $420 ($35/month)

Deductible: $250

Co-payment: $87.50 (0.25 x $350)

Total cost (Premium, deductible, co-payment and costs not covered by the plan): $757.50

Estimated savings: $157.50 more expensive

Annual drug costs: $3,000 ($250/month)

Annual premium: $420 ($35/month)

Deductible: $250

Co-payment: $500 (0.25 x $2,000)

Drug costs not covered: $750 (Amount between $2,250 and $3,000)

Total cost: $1,920

Estimated savings: $1,080 (36 percent)

Annual drug costs: $5,000 ($416.67/month)

Annual premium: $420 ($35/month)

Deductible: $250

Co-payment: $500 (0.25 x $2,000)

Drug costs not covered: $2,750 (Amount between $2,250 and $5,100)

Total cost: $3,920

Estimated savings: $1,080 (22 percent)

Annual drug costs: $10,000 ($833.33/month)

Annual premium: $420 ($35/month)

Deductible: $250

Co-payment: $500 (0.25 x $2,000)

Drug costs not covered: $2,850 (Amount between $2,250 and $5,100)

5% co-payment for amounts over $5,100 ($4,900): $245

Total cost: $4,265

Estimated savings: $5,735 (57 percent)

Annual drug costs: $14,400 ($1,200/month)

Annual premium: $420 ($35/month)

Deductible: $250

Co-payment: $500 (0.25 x $2,000)

Drug costs not covered: $2,850 (Amount between $2,250 and $5,100)

5% co-payment for amounts over $5,100 ($9,300): $465

Total cost: $4,485

Estimated savings: $9,915 (69 percent)

Compiled by David Farmer with assistance from John S. H. Carter of Lovell, Maine. Information from wire reports and the U.S. Department of Health and Human Services.

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