"All right, children. Settle down and I'll tell you about how Santa brought all the grandmothers and granddaddys the gift of Medicare prescription drug coverage."
"Yaaaaay! Will it make our Grammy and Grandpa happy?"
"That depends. Yes indeed, lots of seniors will get part of their drug costs paid. But it's kind of complicated ... "
"Tell us! Tell us!"
"Well, okay. Starting in 2006, everybody on Medicare will have to decide whether to sign up for prescription drug coverage through a private provider. If they sign up, they'll have to start paying an extra monthly premium, which is supposedly going to be about $35 a month."
"Then will Gramma get her pills free?"
"Not quite, little Timmy. Then there's a $250 annual deductible that she has to spend before any coverage kicks in. After that, the coverage will pay 75 percent of the cost of drugs up to $2,250 a year."
"Wait a minute, Daddy. You're telling us there's a $35 a month premium, a $250 annual deductible, and then only 75 percent coverage up to $2,250? Doesn't that add up to as much as $1,170 out of pocket?"
"I am very proud of you, Susie. Your math is definitely getting better. In fact, Gramma would have to spend more than $810 a year on drugs for this coverage to be worth it at all."
"Daddy, you said the plan covers 75 percent up to $2,250 a year. What happens when you need more than that?"
"A good question, Timmy. Nothing. Nothing is covered after that, until the total cost of your drugs reaches $5,100 for the year. At that level, catastrophic coverage finally kicks in."
"Holy cow! In theory, that means you could spend up to $4,020 out of pocket in a single year?"
"Clearly, studying for the FCAT is paying off for you, sweetie. There are a couple other things I should tell you, too."
"Like what, Daddy?"
"Like, the specific drugs that are covered will have to be on an approved list, called a "formulary.' If the drug you need isn't on the list, you have to pay for it yourself - and it doesn't count toward your deductibles."
"Oh, that doesn't sound too good."
"Also, you need to know that the law says new Medigap insurance policies cannot cover these out-of-pocket costs for drugs. Grammas and Grandpas have to use their own cash. And by the way, employers who now offer insurance coverage for their retirees may drop it."
"This doesn't sound like a nice Christmas story at all! What about all the mommies and daddies out there? Is this good for them?"
"Thank you for thinking of us, since we are the ones paying taxes. But the answer is no. Either we mommies and daddies will have to pay for all this, or else the president will keep borrowing money and you'll have to pay for it. And the $400-billion they have set aside for the first 10 years is only a fraction of the true drug cost, which is more like $1.8-trillion. So either everybody is going to get socked with big premium increases or taxes down the road. There is no free lunch."
"Waaaaaah! Isn't there a happy ending?"
"Sure! A few people are very, very happy."
"Yaaay! Who are they?"
"The private outfits that are going to provide this coverage will get a lot of extra money from the government in the early years as an "incentive' to sign up customers."
"Goodie! Anybody else?"
"Yes, the drug companies themselves make out like bandits. The federal government, amazingly enough, is not allowed under this law to try to negotiate lower prices. Meanwhile, the ban on reimportation of drugs from Canada is continued. Really, it was a beautiful job by the lobbyists for drug companies."
"So they'll have a merry Christmas?"
"The merriest Christmas ever, children! So even though the nation will go bankrupt, and this program is going to explode in a few years, and your Mommy and Daddy and you children too will go broke paying for it, we can all take cheer in the fact that Congress will get its campaign contributions, the president and the AARP will get political credit, and the drug companies and insurance industries will get richer. And now, children, let us all end the story together, the way I taught you ... "
