Retirement Insights

Demand Grows for Seniors' Drug Plan

By Karen Gilgoff, Assistant Director, Retiree Program

The high cost of prescription drugs, particularly for senior citizens, is a hot issue this election year. One reason: Prices have gone up 30 percent since 1994 on the drugs seniors use most; that's twice the rate of general inflation. Another: Medicare only covers drugs used in hospitals.

Adding fuel to the political fire are the record profits of the big drug manufacturers — in 1998, they were nearly five times higher than the Fortune 500 average.

Clearly, if Medicare were being enacted now, it would have a drug benefit. Seniors account for one-third of all prescribed medications. Over 85 percent use at least one daily prescription. Yet most have inadequate drug coverage or none at all.

AFSCME retirees tend to be among the fortunate 28 percent of seniors whose prescriptions are covered by employer plans. But employers, citing rising prices, continually raise retirees' co-payments and the number of employers providing coverage has dropped significantly.

Even in AFSCME, about a quarter of our retirees have no employer-paid coverage. Along with millions of other Medicare participants, they buy insurance or pay drug costs themselves. (See below.)

LIMITED COVERAGE. Unfortunately, non-group prescription-drug insurance has severe limitations. Medicare HMOs generally cap benefits at less than $1,000 a year. "Medigap" policies that cover drugs charge nearly $100 a month extra for the benefit and still have big deductibles, co-pays and coverage caps. Due to these and other drawbacks, HMOs and Medigap together cover only 15 percent of seniors for drugs.

Completing the coverage picture are veterans' benefits and public assistance for low-income seniors. But that still leaves nearly 40 percent of seniors with no drug coverage of any kind.

Just as worrisome, uninsured seniors pay more for their prescriptions than just about anyone else in the industrialized world. They pay the retail price, while the big-volume drug purchasers bargain with the drug companies for deep discounts. So do national health plans around the globe.

NOW IS THE TIME. But now that our federal government is flush, with budget surpluses projected far into the future, the time is right for seniors to get some relief from all the price gouging. The Presidential candidates disagree on the solution, however. AFSCME supports Al Gore's plan, which would provide

• a guaranteed drug benefit in Medicare, available to every beneficiary who wants it, regardless of income or health status;
• optional coverage, so retirees who enjoy good employer-paid benefits can stick with what they have;
• affordable premiums and out-of-pocket costs;
• comprehensive benefits that cover the most current and effective medications;
• rebates for employers who provide retiree drug coverage, to help them meet rising costs and maintain benefits;
• additional low-income subsidies that cover premiums and co-pays; and
• strong cost-containment measures that reflect the purchasing power of Medicare's large pool of seniors.

Pharmaceutical companies are fighting this with a multi-million dollar campaign. They fear price negotiations on behalf of Medicare's huge pool would eat into their profits. They want HMOs and other private insurance plans, not Medicare, to cover seniors' prescriptions.

George W. Bush supports the drug industry's approach. In fact, his chief advisor on seniors' coverage is Gail Wilensky, a consultant who enjoys lucrative contracts with major drug companies.

AFSCME opposes Bush's plan because it doesn't guarantee benefits and can't ensure affordability. Insurance companies have their own reservations. Providing seniors with comprehensive coverage is too expensive to be profitable, they say.

What Drug Coverage Really Means

Says Harold Anglemyer of Middletown, N.Y., a member of AFSCME Retiree Chapter 82: "I'm forever glad to have our employer-paid drug plan. Just compare the numbers."

Compare them indeed! Here's a list of the drugs Anglemyer and his wife take for their health conditions, including the retail cost at his local pharmacy versus his co-payments under the New York state plan (for 90-day supplies).