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Medicare Rx Bill No Cure-All

The Medicare prescription drug package passed by Congress is a major victory for President Bush and Republicans, but a mixed bag for seniors who could still face steep and rising costs for medicines.

That rise largely reflects the projected growth in the costs of medicines, as treatments become more effective in prolonging lives.

When the program starts in 2006, seniors will pay $35 dollars a month — $420 a year — for drug coverage, and $250 out of pocket before insurance kicks in. Insurance will pay 75 percent of costs between $250 and $2,250, then pay nothing until bills reached $5,100. Above that level, insurance would cover 95 percent of drug costs.

Those are the numbers supporters of the bill have used, with little mention that they would change in future years.

But after just one year, the Congressional Budget Office projects that seniors would see their $250 deductible and the $2,850 gap for which there is no coverage both jump 10 percent.

By 2013, the eighth year of the program, the deductible and the coverage gap are both projected to grow by 78 percent.

In other words, seniors would pay a $445 deductible and those with the largest drug bills would be entirely responsible for more than $5,000 in drug costs.

"I think these numbers will come as a shock to consumers and they are pretty optimistic projections based on what drug costs are going to do," said Gail Shearer, a health policy analyst at Consumers Union and an opponent of the legislation. She noted the focus has been on 2006, the year the prescription drug benefit begins.

At the same time, CBO said, Medicare's contribution also would rise each year so that the program would pay $1,500 of the first $2,250 in drug costs in 2006 and $2,666 of the first $4,000 in 2013.

Insurance premiums, which are not set in the bill even for 2006, are projected to increase 65 percent to $58 a month by 2013.

Low-income seniors would be spared from many of these costs.

The projections reflect the lawmakers' decision to tie the cost of the program to increases in drug costs from inflation, new costly drugs coming on the market and expected increases in drug purchases.

"The numbers inflate with the cost of the program. I think that's a good provision," said Sen. Don Nickles, R-Okla., who voted against the bill. The cost to the government is due to rise from $4 billion next year to $65 billion in 2013.

But David Certner, an official of AARP, said: "One of our complaints has been that this benefit would become more unaffordable over time if pegged to drug costs. This bill does not do enough to hold down drug costs."

The AARP tried but failed to get Congress to include measures to slow the rise of drug prices — including allowing cheaper drugs from Canada and giving Medicare authority to negotiate drug prices. Still, the 35-million-member seniors organization endorsed the bill.

"This is a key issue we'll be coming back to," Certner said.

While many Democrats said the prescription drug program was inadequate, it will not go into effect for two years. By then, the presidential election will be long over.

President Bush heralded passage the drug coverage bill as evidence he is breaking the partisan gridlock in Washington. For years Medicare has been a trademark issue of the Democrats, but the Senate's vote Tuesday broke their hold.

"Some said Medicare reform can never be done," Mr. Bush said in Las Vegas. "For the sake of our seniors, we've got something done. We're acting."

Seniors are not the bill's only beneficiaries: CBS News Correspondent Wyatt Andrews reports the Medicare bill spends $87 billion on subsidies to businesses to encourage them to maintain health insurance for elderly retirees, $25 billion to rural hospitals serving Medicare and $12 billion to help managed care expand into rural areas.

The biggest corporate winner by far is the drug industry itself — mostly because under the new law, Medicare is barred from negotiating drug discounts. Even though HMOs, hospitals and the Veterans Administration can bargain for volume discounts, saving hundreds of millions, Medicare cannot.

Final passage of the bill came as Mr. Bush campaigned in Nevada and Arizona, two states with a high percentage of older Americans, a prime political target of his re-election drive.

Democrats were determined not to let Mr. Bush's Medicare victory go unchallenged.

Within hours of the Senate's 55-44 Senate vote Tuesday, Senate Democratic leader Tom Daschle introduced legislation to repeal several of the bill's most controversial provisions and to allow the importation of lower-priced prescription drugs from Canada and Western Europe. "This debate is not over. It's just beginning," Daschle said.

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