January 1, 2006 in Nation/World

Medicare drug benefit ‘experiment’ launches

M. William Salganik Baltimore Sun
 
Associated Press photo

Pacificare Health Systems used the Fred and Ethel characters from the “I Love Lucy” TV series in commercials to help advertise its plan for the new Medicare drug benefit. The federal government is relying on private companies such as Pacificare to provide the new coverage.
(Full-size photo)

at a glance

Medicare drug plan

» Medicare’s prescription drug coverage rolls out today.

» In each state, beneficiaries can choose from among dozens of plans. While the plans differ in many respects, the benefit package must at least be equal in value to what is called the standard benefit, which looks like this:

» •Beneficiaries will pay a monthly premium of $32.20 per month. They will also be responsible for the first $250 in drug expenses and then will pay, on average, 25 percent of the costs until they reach the benefit limit of $2,250.

» •Once they reach the benefit limit, they will face a gap in coverage. They will have to pay all of their drug costs up to about $5,100 in total drug spending. Medicare will then pay 95 percent of drug costs above that amount.

» People can compare plans on their own through the government Web site www.medicare.gov, or they can call (800) MED-ICARE and get an operator to do the comparison for them.

Associated Press

It’s projected to cost $724 billion over the next 10 years. It’s expected to enroll nearly 30 million seniors and people with disabilities. It relies on private insurance companies to deliver a big new government benefit. It begins today.

And as experts discuss the new Medicare prescription benefit, one word keeps recurring: “experiment.”

“It’s a fascinating social experiment in using private sector resources to deliver a social benefit,” said Dan Mendelson, president of Avalere Health LLC, a Washington consulting company. “What Congress did was completely unprecedented – they created new markets and new products.”

Even before implementation, the program was under attack from opposite sides of the political spectrum. Conservatives see it as a “central control” entitlement program, the first step toward price controls on drugs. Liberals see it as turning too many dollars and too much control to profit-hungry companies, the first step toward privatizing other government programs.

Its health impact is uncertain as well. Some seniors who had no drug coverage will benefit. Others will find that the drugs they’ve been taking aren’t covered or that their coverage has gaps – including a “doughnut hole” – leaving them to pay thousands of dollars out of pocket. All of that makes the overall effect on access to medications hard to gauge.

“It’s a huge natural experiment,” said Stephen Soumerai, a professor at Harvard Medical School. “We’re going to have a research agenda for a lifetime.”

Among the factors with unknown impacts:

• Most enrollees in the program won’t get coverage for drug costs between $2,250 and $5,100 a year. This is the doughnut hole, a provision to keep costs down.

• Seniors, who generally are not used to managed care limits on which medications they get, will find aggressive controls in some plans, according to Mendelson. These include efforts to switch patients to less expensive drugs or make them try them before the insurer will pay for expensive ones.

• Because each private insurer decides which drugs it will cover, some people will find themselves in plans that don’t cover the medications they take.

• For a variety of reasons, many people who could benefit from the new plans might not sign up. Also, if only the sickest enroll, premiums probably will increase steeply in the future.

With the typical senior now facing nearly $2,000 a year in drug costs, up from $559 in 1992, there was little dissent that help was needed. The question was what kind.

The Bush administration and a narrow majority in each house of Congress pushed through a program they described as a shrewd way to harness the power of the marketplace – let competing private insurers negotiate prices with drug companies, design their own deductibles and co-payments, and set their own premiums.

It’s working, say proponents. As evidence, they point to the fact that the average monthly premium is $32, about $5 lower than predicted, and that many plans offer no deductible and/or some coverage in the doughnut hole.

While pundits on both sides of the political spectrum worry about the long-term implications, others are concerned about the immediate impact.

The program clearly will improve access to drugs and save money for lots of seniors.

People with very high drug costs will save. Mendelson estimates that 3.3 million seniors who enroll in the program will spend their way through the doughnut hole, then qualify for 95 percent of drug bills to be covered.

It also will benefit people with incomes low enough to qualify for “extra help” but who don’t have current coverage.

But 6.2 million low-income Medicare beneficiaries, who have been getting their prescriptions paid by state Medicaid programs, are being switched over to Medicare. Unless they chose a plan themselves, they’ve been assigned randomly to one of the private plans.

For the average Medicare beneficiary, the new drug benefit “will not be life-changing,” said Marilyn Moon, director of the health program at American Institutes for Research.

Medicare Today, a coalition of industry and health groups supporting the program, estimates that the average senior would pay $1,300 out-of-pocket for prescriptions in 2006 without the benefit, $900 with it.


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