San Antonio Express-News
May 18, 2004

Medicare Drug Discount Cards

copyright 2004, Paul Premack

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 authorized Medicare to contract with drug companies for discount cards. Recall that this is the law that Congress passed in the middle of the night, after holding the vote open for hours so that representatives could be pressured to vote yes. It is now projected by Congress to cost taxpayers far more than the administration disclosed during the debate.

With that notorious source, the voluntary discount card program is generating significant controversy. Medicare’s new administrator, Mark McClellan, says the discount cards will provide "significant price reductions off typical retail prices." But two other sources contradict that claim.

First, a report recently released by Families USA alleges that even with a discount card, Medicare beneficiaries will pay more for the top 10 drugs used by seniors than the prices negotiated by the federal government for veterans. The report says regular prices through an internet drug store were comparable to the discount card program’s prices.

Second, the House Government Reform Committee published a study concluding that many seniors will pay more for drugs using the discount cards than they would pay at retail. Congressional leaders have charged that the drug manufacturers are raising prices so the discounts won’t cut into their bottom line.

Perhaps the worst feature of the discount card program is that Congress restricted seniors have only a single opportunity to switch card providers (in November 2004, for year 2005) while legally allowing the card providers to change both the drugs they offer and the prices they charge weekly. So if you select what appears to be a great card today, it may not be a great card next month.

Congress also restricted what are perhaps the best features of the program to Medicare beneficiaries who are low-income. Individuals with annual income below $12,570 or married couples with annual income below $16,863 qualify for 1) a $600 credit on drug purchases, and 2) an exemption from the annual fee for a discount card (though they will often have to pay 5% out-of-pocket for each prescription).

Medicare beneficiaries can begin to apply for the cards right now, but benefits won’t begin until June 1, 2004. In an effort to make the process easier, Medicare has posted detailed guides on its website at www.Medicare.gov.  For instance, you can use an on-line questionnaire to help choose a card and find out how much each sponsor charges to enroll. My search turned up 44 alternatives, so it does not do much to hone your options. You can also compare current prices for your list of prescription drugs to see which card offers the best discount right now (remembering the warning that the provider can legally change prices and drugs weekly, but you can only change provider once).