Now the drug plan part of the Medicare reform act is about to go into effect. It will lock seniors and the disabled into plans based on the extortionate prices charged here by the drug companies. And under this act, the federal government is specifically prohibited from negotiating with drug companies to lower their prices.

In November 2005, according to the Social Security Administration, the average monthly check for all types of beneficiaries—retirees, their survivors and the disabled—was $879. Seniors covered by Medicare Part B would pay a $78 premium, leaving them $801, or about $9,600 per year. If they choose a Medicare drug plan, they will pay an additional $35 a month premium—reducing their Social Security check to $766, or $9,192 a year. There is a deductible of $250 before the plan kicks in. After that, they pay 25 percent of all covered drug expenses up to $2,250.

But what drugs are covered? It all depends on each individual private plan in each area. So does the price of the drugs. That’s why it’s so hard to know what all this will really cost each person out-of-pocket. Let’s assume that someone receiving the average yearly Social Security payout—$9,192 (after Medicare premiums are deducted)—is lucky enough to get a drug plan that covers the medicines they need, and that the total (drug) cost for the year comes to $2,250. They pay $250 for the deductible plus $500 (25 percent of the next $2,000), leaving them with a yearly (net) income of only $8,442.

But what if their drugs cost more than that? It’s not uncommon for someone with a heart condition or some other chronic ailment to spend $300 a month on drugs these days. Here’s where the infamous “donut hole” comes in. With the next $1,350 worth of medicines required, the Medicare drug plan covers—nothing!

The plan is supposed to provide assistance for very low-income people. But they can’t have more than a few thousand dollars in assets. By the end of November, only one in nine of the 5.7 million low-income seniors not covered by Medicaid had been approved for assistance.

The bottom line is that the average person on Social Security who requires a significant amount of medications will not be able to survive on this drug plan, unless they have substantial supplemental income.