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Medicare drug plan needlessly complex
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Each year, as older citizens re-enroll in the Medicare Part D drug plan, they face a needlessly expensive and complex system that was established for the benefit of insurers and pharmaceutical manufacturers rather than for consumers.
The Bush administration and its congressional allies adopted a plan that actually forbids Medicare from using the economic power of its vast customer base in order to secure the lowest possible prices from pharmaceutical manufacturers. And it added a layer of profit for insurers — money that instead could go toward procuring medicine and holding down the cost of the program.
Instead of controlling prices through volume discounts from medicine manufacturers, the program controls costs through coverage gaps, a bizarre and dangerous mechanism that has come to be known as “the doughnut hole.”
Participants in the drug plan must enroll in a private insurance program. Each plan has a “formulary,” or list of covered drugs. And the plans offer an array of premiums, deductibles and co-pays. All of them include the “doughnut hole.” That is, they cover the agreed-to percentage of medicine purchases up to a point, at which consumers assume the entire cost until they reach what is known as the “catastrophic” threshold, at which point the insurance coverage resumes.
Backers of the plan note that Medicare Part D has cost less than originally projected. But that is primarily because of the doughnut hole. It’s easy for a drug plan to save money when it doesn’t cover the costs of drugs for people who need them most.
The cost of that is not in money alone. According to a study this year by the Kaiser Family Foundation, about 3.4 million enrollees in Medicare Part D entered the “doughnut hole” in 2007 and became responsible for their next $3,000 worth of drug purchases. About 15 percent of those people, 510,000, stopped taking their medicine. That, of course, helped insurers because by not spending their way through the doughnut hole, those “beneficiaries” never resumed coverage.
And the doughnut hole is growing. By 2016, plan participants will have to spend $6,000, once they reach the coverage gap, before coverage can resume on the other side of the doughnut hole.
Plan advocates claim that competition among insurers keeps down costs. But the individual plans themselves change constantly in terms of what they offer. And premiums rise as the doughnut hole widens and insurers restrict coverage. Some plans offer “gap coverage” — partial payment for drugs purchased during the doughnut hole period — for an extra price. But this year, for the first time, no plan offers gap coverage that includes brand-name drugs, some for which there is no generic equivalent.
Premiums for plans without gap coverage will increase an average of 13 percent for 2009, while deductibles will increase 9.5 percent.
Simultaneously, and probably not coincidentally, competition will decrease. Nationwide, there will be 1,689 plans in 2009, down from 1,824 this year. And only 18 percent of those plans will be available to enrollees who receive a low-income subsidy, down from 27 percent this year and 34 percent in 2007.
Congress should revisit the Part D drug plan next year and recraft it in the public interest rather than insurers’ interest.
Rather than allowing insurers to control costs by eliminating coverage within the doughnut hole, Congress instead should resource costs at the source. It should not only allow but require Medicare to negotiate for volume discounts with manufacturers. Other federally subsidized programs that negotiate such discounts, particularly the Department of Veterans Affairs, achieve prices that range up to 50 percent lower than those paid through Medicare Part D.
Simplifying the program and reducing the costs of Medicare Part D will serve taxpayers and beneficiaries alike. Congress should make it a priority.
The Bush administration and its congressional allies adopted a plan that actually forbids Medicare from using the economic power of its vast customer base in order to secure the lowest possible prices from pharmaceutical manufacturers. And it added a layer of profit for insurers — money that instead could go toward procuring medicine and holding down the cost of the program.
Instead of controlling prices through volume discounts from medicine manufacturers, the program controls costs through coverage gaps, a bizarre and dangerous mechanism that has come to be known as “the doughnut hole.”
Participants in the drug plan must enroll in a private insurance program. Each plan has a “formulary,” or list of covered drugs. And the plans offer an array of premiums, deductibles and co-pays. All of them include the “doughnut hole.” That is, they cover the agreed-to percentage of medicine purchases up to a point, at which consumers assume the entire cost until they reach what is known as the “catastrophic” threshold, at which point the insurance coverage resumes.
Backers of the plan note that Medicare Part D has cost less than originally projected. But that is primarily because of the doughnut hole. It’s easy for a drug plan to save money when it doesn’t cover the costs of drugs for people who need them most.
The cost of that is not in money alone. According to a study this year by the Kaiser Family Foundation, about 3.4 million enrollees in Medicare Part D entered the “doughnut hole” in 2007 and became responsible for their next $3,000 worth of drug purchases. About 15 percent of those people, 510,000, stopped taking their medicine. That, of course, helped insurers because by not spending their way through the doughnut hole, those “beneficiaries” never resumed coverage.
And the doughnut hole is growing. By 2016, plan participants will have to spend $6,000, once they reach the coverage gap, before coverage can resume on the other side of the doughnut hole.
Plan advocates claim that competition among insurers keeps down costs. But the individual plans themselves change constantly in terms of what they offer. And premiums rise as the doughnut hole widens and insurers restrict coverage. Some plans offer “gap coverage” — partial payment for drugs purchased during the doughnut hole period — for an extra price. But this year, for the first time, no plan offers gap coverage that includes brand-name drugs, some for which there is no generic equivalent.
Premiums for plans without gap coverage will increase an average of 13 percent for 2009, while deductibles will increase 9.5 percent.
Simultaneously, and probably not coincidentally, competition will decrease. Nationwide, there will be 1,689 plans in 2009, down from 1,824 this year. And only 18 percent of those plans will be available to enrollees who receive a low-income subsidy, down from 27 percent this year and 34 percent in 2007.
Congress should revisit the Part D drug plan next year and recraft it in the public interest rather than insurers’ interest.
Rather than allowing insurers to control costs by eliminating coverage within the doughnut hole, Congress instead should resource costs at the source. It should not only allow but require Medicare to negotiate for volume discounts with manufacturers. Other federally subsidized programs that negotiate such discounts, particularly the Department of Veterans Affairs, achieve prices that range up to 50 percent lower than those paid through Medicare Part D.
Simplifying the program and reducing the costs of Medicare Part D will serve taxpayers and beneficiaries alike. Congress should make it a priority.
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Nancy Schrader wrote on Dec 1, 2008 1:15 AM: