Insurance—Those With and Those Without - The Medicare Perscription Drug, Improvement, And Modernization Act Of 2003

On December 8, 2003, President George W. Bush signed the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (PL 108-173) into law. Heralded as landmark legislation, the act provides older adults and persons with disabilities with a prescription drug benefit, more choices, and improved benefits under Medicare. On June 1, 2004, seniors and people with disabilities began using their Medicare-approved drug discount cards to obtain savings on prescription medicines. Low-income beneficiaries qualified for $600 credit to help pay for their prescriptions. In addition to providing coverage for prescription drugs, this legislation offers

	Medicaid1,10
Characteristic	1989	1995	1998	1999	2000	2001
— Data not available.
1Almost all persons 65 years of age and over are covered by Medicare also. In 2001, 90 percent of older persons with private insurance also had Medicare.
2Private insurance originally obtained through a present or former employer or union. Starting in 1997 also includes private insurance obtained through workplace self-employed, or professional association.
3Includes all other races not shown separately and unknown poverty level.
4Estimates are for persons 65 years of age and older and are age adjusted to the year 2000 standard using two age groups; 65–74 years and 75 years and over.
5The race groups, white, black, American Indian and Alaska Native (AI/AN), Asian, Native Hawaiian and other Pacific Islander, and 2 or more races, include persons of Hispanic and non-Hispanic origin. Persons of Hispanic origin may be of any race. Starting with data year 1999 race-specific estimates are tabulated according to 1997 Standards for Federal data on Race and Ethnicity and are not strictly comparable with estimates for earlier years. The five single race categories plus multiple race categories shown in the table conform to 1997 Standards. The 1999 and later race-specific estimates are for persons who reported only one racial group; the category "2 or more races" includes persons who reported more than one racial group. Prior to data year 1999, data were tabulated according to 1977 Standards with four racial groups and the category "Asian only" included Native Hawaiian and other Pacific Islander. Estimates for single race categories prior to 1999 included persons who reported one race or, if they reported more than one race, identified one race as best representing their race. The effect of the 1997 Standard on the 1999 estimates can be seen by comparing 1999 data tabulated according to the two Standards: Age-adjusted estimates based on the 1977 Standards of the percent with private health insurance are: 0.1 percentage points lower for the white group; 0.3 percentage points higher for the black group; and 1 percentage point higher for the Asian and Pacific Islander group than estimates based on the 1997 Standards.
6Missing family income data were imputed for 22–25 percent of the sample 65 years of age and over in 1994–96. Percent of poverty level was unknown for 29 percent of sample persons 65 or older in 1997, 34 percent in 1998, 38 percent in 1999, 39 percent in 2000, and 40 percent in 2001.
7MSA is metropolitan statistical area.
8Medicare fee-for-service only includes persons who are not covered by private health insurance, Medicaid, or a Medicare health maintenance organization.
9Persons reporting Medicare coverage are considered to have HMO coverage if they responded yes when asked if they were under a Medicare managed care arrangement such as an HMO.
10Includes public assistance through 1996. Starting in 1997 includes State-sponsored health plans. In 2001 the age-adjusted percent of the population 65 years of age and over covered by Medicaid was 7.6 percent, and 0.5 percent were covered by State-sponsored health plans.
Note: Percents do not add to 100 because elderly persons with more than one type of insurance in addition to Medicare appear in more than one column, and because the percent of elderly persons without health insurance (1.3 percent in 2001) is not shown.
SOURCE: "Table 130. Health Insurance Coverage for Persons 65 Years of Age and Over, According to Type of Coverage and Selected Characteristics: United States, Selected Years 1989–2001," in National Health Interview Survey, Centers for Diesease Control and Prevention, National Center for Health Statistics, 2003, http://www.cdc.gov/nchs/data/hus/tables/2003/03hus130.pdf (accessed November 16, 2004)
	Number in millions
Total3	2.0	3.0	2.6	2.4	2.5	2.7
	Percent of population
Total, age adjusted3,4	7.2	9.6	8.1	7.4	7.6	8.1
Total, crude3	7.0	9.4	8.1	7.3	7.6	8.1
Age
65–74 years	6.3	8.4	7.8	6.6	7.7	7.8
75 years and over	8.2	10.9	8.4	8.1	7.5	8.5
75–84 years	7.9	9.9	7.8	7.2	7.2	8.1
85 years and over	9.7	14.3	10.5	11.4	8.6	10.3
Sex4
Male	5.2	5.8	6.2	5.3	5.5	6.1
Female	8.6	12.2	9.5	8.8	9.2	9.7
Race4,5
White only	5.6	7.4	6.4	5.6	5.6	6.2
Black or African American only	21.2	28.4	18.0	18.2	19.6	20.0
American Indian and Alaska Native only					35.8
Asian only			33.4	28.2	21.3	23.7
Native Hawaiian and Other Pacific Islander only	—	—	—
2 or more races	—	—	—			19.9
Hispanic origin and race4,5
Hispanic or Latino	26.4	32.7	27.2	24.0	29.6	30.1
Mexican			29.0	17.5	28.1	25.6
Not Hispanic or Latino	6.6	8.5	7.1	6.4	6.3	6.8
White only	4.9	6.1	5.4	4.7	4.6	4.9
Black or African American only	21.1	28.5	18.0	18.1	19.5	20.0
Percent of poverty level4,6
Below 100 percent	28.2	36.4	36.7	35.7	35.0	38.8
100–149 percent	9.0	12.8	14.1	15.3	16.2	18.6
150–199 percent	4.7	5.9	6.1	4.2	4.7	7.1
200 percent or more	2.4	2.4	3.5	2.9	2.8	3.1
Geographic region4
Northeast	5.4	8.9	7.5	7.3	7.4	7.9
Midwest	3.7	5.8	4.9	5.7	4.5	5.1
South	9.7	11.8	9.6	8.2	9.4	9.3
West	9.4	11.5	10.2	8.2	8.6	10.0
Location of residence4
Within MSA7	6.5	8.9	8.0	6.9	7.2	8.1
Outside MSA7	8.8	11.7	8.4	8.8	9.0	8.3

seniors the opportunity to choose the coverage and care that best meets their needs. For example, some older adults may opt for traditional Medicare coverage along with the new prescription benefit. Others may wish to obtain dental or eyeglass coverage, or to enroll in managed care plans that reduce out-of-pocket costs.

The legislation stipulated that beginning in 2005, all newly enrolled Medicare beneficiaries will be covered for a complete physical examination and other preventive services such as blood tests to screen for diabetes. The new law also aimed to assist all Americans in paying out-of-pocket health costs by enabling creation of health savings accounts (HSAs). HSAs allow Americans to set aside up to $4,500 every year, tax free, to save for medical expenses.

Will New Medicare Law Erode Retiree Benefits?

Some health care industry observers and older adults fear that full implementation of Medicare prescription drug coverage in 2006 will prompt employers to sharply reduce or even entirely eliminate prescription drug benefits for as many as one third of the nation's retirees with employer-sponsored drug coverage—about 3.8 million older adults. In the July 14, 2004, article "Medicare Law Is Seen Leading to Cuts in Drug Benefits for Retirees," New York Times journalist Robert Pear reported that the new law, which from 2006 to 2013 will provide federal subsidies to encourage more employers to continue providing drug benefits, may actually further erode the level of benefits offered to retirees.

According to the U.S. Department of Health and Human Services, the new law will provide 7.6 million retirees with drug benefits through employer plans subsidized by the government, and 3.8 million will continue to receive their primary drug coverage from Medicare. This number is expected to swell to 4.1 million by 2010. Supporters of the new law and many employers contend that it will help stabilize retiree health benefits and support employers to continue providing drug coverage—satisfying the wishes of retirees, labor unions, and members of Congress from both parties.

To qualify for federal subsidies, equal to 28% of drug costs from $250 to $5,000 a year per retiree, employers must demonstrate that their retiree drug benefits are as generous as those provided by Medicare. The subsidies will be tax-free to employers, who can still take tax deductions for the cost of retiree health benefits. Detractors fear that if criteria for participation and compliance with federal rules and administrative regulations become too burdensome for employers, they will likely drop their retiree coverage, forcing retirees to rely on conventional Medicare including its standard prescription drug benefit, which is valued at about $1,200 per year.