LOOKING FOR THE MAGIC PILL, AT A GOOD PRICE
Older people must be on drugs. Expensive ones.
Congress is debating whether or not to add a prescription drug feature to the Medicare program. As those of you 65 or older know, Medicare does not pay for prescription drugs. Recently, there has been a significant amount of debate over the issue.
Last week the Senate voted down two proposals – one sponsored by the Republicans, one by the Democrats – to add a prescription drug feature to the Medicare program. The Democratic version of the bill would have cost the federal government – and eventually, you, the taxpayers – $594 billion by 2012. The Republican version would have come in at a modest cost of $320 billion. Mere pocket change!
But both versions failed, so for now, you have to buy your own drugs; the government is not going to help you out. At least not the federal government.
The state government – well, for some people – that’s another story.
New Jersey has several programs that will pay for or contribute to the cost of prescription drugs. There’s Medicaid, which is actually a federal and state program. But Medicaid, as most of you know, is a welfare program. You must have very little in the way of assets in order to qualify for Medicaid; however, if you do qualify, many of the Medicaid programs – and there are a lot – will pay for the cost of prescription drugs.
Then there are the wholly state-sponsored prescription drug programs: Pharmaceutical Assistance to the Aged and Disabled (PAAD) and Senior Gold. Unlike the Medicaid program, PAAD and Senior Gold are not welfare programs, and they’re not dependent on the value of your assets, just your income level.
Of the two programs, PAAD has been around longer, since 1976 as far as I can tell. Senior Gold has only been with us since 2001.
A qualified PAAD recipient can purchase prescription drugs with a $5 co-pay. For Senior Gold, the benefits are fewer. A qualified Senior Gold recipient has a $15 co-pay and must pay 50% of the remaining cost of the prescription, but once the recipient’s annual out-of-pocket expenses exceed $2,000 for a single person and $3,000 for a married couple, only the $15 co-pay is required.
As stated, eligibility for both programs is determined using a person’s or couple’s income. Income eligibility for PAAD is currently $19,739 for a single person and $24,203 for a couple. If a person’s or a couple’s income is at or below those limits, PAAD benefits are available.
For Senior Gold, which offers a lesser benefit, the income eligibility limits are higher. For a single person, the income eligibility limit is from $19,739 to $29,739. And for a couple, the limit is $24,203 to $34,203.
So, the question you probably have now is, “John, What do they mean by income?” Examples of income include the following: Social Security benefits, veterans benefits, disability benefits, salaries, wages, bonuses, commissions, fees, dividends, interest (both taxable and nontaxable), capital gains, bequests, support payments, pensions, annuities, unemployment benefits, and business income. The preceding list of income items is not exhaustive; other items may count as “income,” too.
For most people, the major items of income are a pension, Social Security, and unearned investment income (e.g., interest from CDs or a money market account, dividends).
PAAD and Senior Gold offer a stop-gap to those individuals who qualify against the high cost of prescription drugs. Someday, maybe someday soon, Congress will pass a prescription drug plan that is part of the Medicare system. It is, after all, an election year.
Complex planning challenges rarely have simple answers. Whether the issue involves Medicaid, long-term care, or estate planning, successful outcomes usually result from careful analysis and realistic expectations rather than promises of an easy fix.