HoosierRx a National Model

December 4, 2005

Andrea Neal column for release June 8 and thereafter
700 words

INDIANAPOLIS — Politicians dead-set on a prescription drug benefit for seniors are faced with two options: Maintain their foolish plan for a new Medicare entitlement that will bankrupt future generations, or follow in the footsteps of Indiana.

In a refreshing change from the norm, Indiana is the trendsetter in providing prescription benefits to seniors. The HoosierRx program, launched in October 2000 under Gov. Frank O’Bannon, was already getting notice before Congress passed a mammoth Medicare bill last fall.

As of June 1, when the new Medicare Discount Drug Card took effect nationally, Indiana can boast of one of the most effective programs in the nation.

In essence, what low-income Hoosiers enjoy that other folks don’t is a dual drug benefit worth up to $600 a year in Medicare subsidies and $1,200 in state subsidies funded by tobacco settlement dollars.

It’s significant savings and, in many cases, enough to cover a senior’s annual prescription needs. The Centers for Medicare and Medicaid Services estimates that the average Medicare recipient without drug coverage spends $1,400 a year on medicine.

What’s best of all about HoosierRx, it serves only those who need it. Some 18,000 seniors are currently enrolled and state officials believe another 12,000 are eligible.

Here’s how it works: Residents 65 or older may apply for the HoosierRx card if they aren’t covered by insurance or Medicaid and if their annual income is less than $1,068 a month if single; $1,426 a month if married. When they take their card to the pharmacy, they immediately qualify for a 75 percent discount off the price of their prescriptions, up to a maximum of $1,200 annually. In addition, they pay less-than-wholesale prices for prescriptions, even after exhausting their annual subsidy.

Typically, when both the state and federal governments offer a similar program, the amount of the state benefit is reduced by the federal subsidy. House Bill 1251, passed during the 2004 session of the legislature, permitted Hoosiers to apply for both federal and state subsidies as long as the Medicare subsidy is used first.

Unfortunately, the discount card goes the way of the dinosaur in 2006. That’s when the federal government’s complex new entitlement program takes effect, offering low-cost drugs to all Medicare recipients, even the wealthy.

This entitlement will cost taxpayers $50 billion a year and an estimated $1.9 trillion over the next 10 years. In contrast, the Medicare Discount Drug Card, which like HoosierRx is targeted to the low-income and uninsured, will cost an estimated $2.3 billion this year and $2.8 billion next year.

The free market-oriented Heritage Foundation, in a May 28 report, said if all states supplemented the Medicare Discount Drug Card with a program like Indiana’s, it would negate the need for a costly entitlement. "If the federal government would encourage all states to follow suit, low-income seniors would realize significant savings on out-of-pocket costs while taxpayers would see future tax burdens shrink," says researcher Derek Hunter.

As of 2002, Social Security and Medicare had unfunded liabilities totaling $24 trillion, a figure seven times greater than the public debt.

By 2016, Hunter says, "when the baby boomers start retiring in huge numbers, the new drug entitlement costs will explode." Medicare officials predict the drug benefit will add another $8.1 trillion to Medicare’s red ink.

"The money to pay for this unfunded liability — a technical term, for the cost of promised future benefits over and above the revenue projected to pay for them — will almost certainly come from major future tax increases," Hunter says.

Permanent adoption of a national drug discount card would solve the underlying problem that led Congress to approve a new entitlement in the first place: the inability of poor elderly to pay for medicines they desperately need.

To all you politicians thinking only about your next election: Why doom future generations to massive tax hikes when a cheaper solution exists? It’s working right here, right now, in Indiana.


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