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1.20.06
Science and Health:
Medicare Update
More on This Story:
The Medicare Part D — Prescription Drug Plan — has come into effect. Judith Stein of The Center for Medicare Advocacy talks to David Brancaccio about the problems users are experiencing. Get important information from NOW's resources linked below. When NOW first reported on the new Medicare bill last year the price tag was large, and the debate over the bill heated. Since then, the Medicare price tag has ballooned. In January 2004, two months after the bill passed, the White House said it would cost over $100 billion more, bringing the cost to $534 billion. Now over a year later, the latest White House estimate is $724 billion. Read more about recent developments in the implementation of the new Medicare legislation and use the links for additional information:


One of the major concerns over the new Medicare legislation was that private companies might cut back health benefits for their retirees, expecting that these retirees would be covered under new Medicare provisions. To counter that eventuality, Congress added on an $89-billion subsidy to encourage employers to continue retiree medical coverage. However, nothing in the law prevents companies from taking the subsidies and scaling back or even cutting off benefits for many of their retirees.

As NOW reported in April, 2005, some companies are passing the healthcare expense burden onto former employees. As the companies pay less, the retirees pay more. Shifting the burden to retirees ultimately results in accounting gains and increased corporate earnings. According to THE WALL STREET JOURNAL, some of the companies making retirees pay more for health benefits include: Bank of America, Halliburton, IBM, R.J. Reynolds Tobacco, Altria Group, the Clorox Company and Black & Decker.

  • Read more about retiree health benefits
  • View NOW's report "The Broken Promise"

    Then, there's the matter of drugs that aren't covered under the new benefit. The plan will not cover a category of drugs commonly used to treat anxiety, insomnia and seizures. That class of drugs, called benzodiazepine, which includes Xanax, Valium, Ativan, accounted for more than $702.8 million in sales in the United States, according to IMS Health. There were 75.6 million benzodiazepine prescriptions in 2004, making it the 11th largest therapeutic class based on total dispensed prescriptions.

    According to THE WASHINGTON POST, "The Centers for Medicare and Medicaid Services urged state Medicaid directors to provide coverage of that class of drugs for the 6.3 million people who are 'dual eligible' for prescription aid under the Medicaid and Medicare programs. The American Medical Association passed a resolution vowing to "work to end the exclusion of medications of the benzodiazepine class from (federal) reimbursement."

    The states are already worried about their share of the costs of Medicare in the coming years. They are especially worried about a provision of the Medicare law that requires them to pay billions of dollars a year to the federal government to help finance the cost of the new Medicare drug benefit. The provision, known as "clawback," requires states to pass over some of the savings they obtain turning 'dual eligibles' drug coverage over from the state/federal financed Medicaid to the federally financed Medicare program.

    Governor Rick Perry of Texas vetoed a $444 million appropriation covering the Texas contribution for the next two years. And, in New Hampshire, the state budget states outright that "no payments shall be made to the federal Medicare program, unless a court has determined that the provisions" of the federal law, "popularly known as the clawback, are constitutional." According to THE NEW YORK TIMES, the Congressional Budget Office estimates that required state contributions to the Medicare trust fund, also known as clawback payments, will total $124 billion from 2006 to 2015. "If a state fails to comply, the federal government can simply deduct the amount owed, plus interest, from its regular payments to the state's Medicaid program."

  • For more information read: The "Clawback:" State Financing of Medicare Drug Coverage from the Kaiser Family Foundation

    Additional sources: "Medicare Won't Cover Some Anxiety Drugs," Kevin Freking, THE WASHINGTON POST, Monday, June 27, 2005; "States Rejecting Demand to Pay for Medicare Cost," Robert Pear Washington, THE NEW YORK TIMES, July 3, 2005.

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