Two low income EPIC enrollees (both with incomes less than $12,659) are approved for the Medicare Drug Discount Card Transitional Assistance of $600/per year. Consumer A spends $110/month on prescriptions while Consumer B spends only $50/month. By December 2004, Consumer A has spent $660 on prescriptions in the first year, and has exhausted the full $600 credit. The $60 beyond the credit, however, was still covered through the enrollees EPIC plan. In January 2005, Consumer A is automatically granted another $600 credit to use for that year. Consumer B, on the other hand, only used $300 of the available $600 credit by the end of 2004 leaving a balance of $300. In January, Consumer B is also automatically awarded another $600 credit from Medicare which is added to Consumer B’s remaining $300 for a total credit of $900 to use for 2005

If a low income EPIC enrolled individual (annual income less than $12,659) needs a drug which costs $100, the EPIC program alone would pay $80 leaving a $20 co-pay for the individual. Currently, EPIC co-pays are based on a sliding scale determined by the cost of each drug. Under the new Medicare law, this low income individual will receive a $600 transitional assistance credit toward the costs of their drugs. When combining the EPIC program and the transitional assistance, the federal government will now be the first payer and pay the $80 instead of EPIC. That $80 will be deducted from the credit line of $600 given to the individual. EPIC will then be charged for the remaining cost of $20 -- as if purchasing a $20 drug ($100 cost of the drug — the $80 paid by Medicare = $20). Under the current EPIC co-pay scale, a $20 drug requires a co-pay of only $7. The individual is then required to only pay $7 at the pharmacy out of their pocket for their $100 drug cost, instead of $20 required under EPIC alone (see Figure 2).