Left In Lowell

They Were Correct - Medicare Drug Plan Won’t Cost Much

3 Responses to “They Were Correct - Medicare Drug Plan Won’t Cost Much”

1. waittilnextyr Says:
   February 23rd, 2006 at 10:44 am

   Councilor Elliott raised the question about reimbursement to the city under this plan to provide a subsidy because the city covers its retirees under a separate prescription plan. I believe that is true, but unfortunately the issue seems to be lost in the black hole of opaqueness with city government.

   But Lynne, the issue is not whether anyone signs up, but rather that the corporations are getting their subsidies for continuing any plans that they had in place for their retirees.

   The way the legislation was written, the corporation (and also the city) is eligible for a 28% subsidy for the cost of the presciption plan exceeding $250 (the deductible) up to a plan cost of $5000 per retiree. Since the majority of medical costs for such retirees is borne by basic Medicare, the supplemental coverage offered by companies is primarily for prescription coverage. Let’s say such a plan costs $250 per month, or $3000. Look at how the corporation may benefit. They co-insure by paying half of that bill, collecting $1500 from the retiree. They deduct that $1500 as a business cost, saving about $500 on the corporate tax bill. Then they apply for the subsidy, which is 28% of the $3000 premium, less the $250 deductible. That means they receive $770 for each retiree. So the net cost to the corporation is $1500, less $500, less $770, or a mere $230. The retiree contributes $1500 and the taxpayer $1270.

   Now, in the case of the city, they pay 75% and don’t receive a tax deduction on their cost, so the numbers are not the same as the above. But the city should receive the subsidy.

   So, even if no one signs up for the plan, the intent of the legislation may be satisfied, if it is really to help the corporations who helped draft the legislation more profitable.

2. Lynne Says:
   February 23rd, 2006 at 1:54 pm

   waittilnextyear: a cogent explanation again. I think I ought to coopt you to write for the blog.

3. waittilnextyr Says:
   February 23rd, 2006 at 8:31 pm

   Thanks, Lynne, but you and Mimi do a great job in promoting the discussion. I am happy that I can get someone to listen to my two cents on some of the topics that you two raise, and I appreciate that opportunity.

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