PrintD is for debacle
By Don Kuehn
Medicare Part D is commonly known as the "Medicare prescription drug program." If you have tried to decipher it for yourself, or for your parents, you probably agree it is nothing short of a debacle.
I have spent hours trying to sort out the plan, the options and the implications of this program for my mother. Next, I’ll have to do the same for my dad, since each person has to enroll individually. And the more I read—the more I think I know about Part D—the more confused I become.
D is for depressing
Here are the basics: The government passed a law to make prescription drugs cheaper for seniors. In my parent’s county in Florida, 44 competing companies charge premiums that range from about $10 to more than $104 per month. There is a $250 deductible, then the plans cover 75 percent of drug costs for the next $2,000. Between $2,250 and $3,600, seniors pay 100 percent of the costs. This has been referred to as the "doughnut hole" of benefits.
A senior who selects a plan with monthly premiums around the average of $37 a month ($440 a year) pays for all of the first $250 in prescriptions to satisfy the deductible and $500 of the next $2,000. In other words, the patient will have paid $750 for $2,250 worth of drugs, plus the monthly premium costs. Then there is no help with the next $2,850 in prescriptions. So, if your monthly drug costs are $337 a month, you break about even. After emerging from the doughnut hole, the real benefits kick in.
After total out-of-pocket annual costs exceed $3,600—not including the monthly premiums—the senior comes out of the doughnut hole and 95 percent of the cost of all drugs is covered until the next Jan. 1. Whew!
Older Americans dealing with chronic or catastrophic illness or disease can easily rack up charges high enough to benefit from the plan. My father’s latest monthly drug bill was more than $890; my mother’s can run more than $420.
Because of the competitive nature of the pharmaceutical business, plan costs and deductibles vary in every jurisdiction. Where my parents live, there are 44 approved plans. Some have no deductible and others charge $250. Some will include all of the drugs you take in their "formulary," some may not. You have to check.
And you’ll have to figure this out every year. Once you enroll, you’re stuck until the "window" prior to the next Jan. 1. Plans, formularies and your medication needs will change, premiums will go up, and pharmacies will opt in or out. The best plan this year may not be the best a year or two from now.
But don’t just jump into a plan that looks cheap. In my mother’s case, even though there are options available with no deductible, the best plan appears to be one with a $250 deductible but low monthly premiums and low monthly co-pays.
Low-income Americans may be eligible for help to pay for this plan. Medicaid or SSI recipients are to be automatically enrolled in the least expensive plan with no deductible and a token $1 to $5 charge per prescription. Catastrophic coverage will be cost-free and many nursing home Medicaid patients will pay nothing.
For those with low incomes (less than $14,355 for individuals or $19,245 for couples living together) and few assets ($11,500 or $23,000) there may be other help available, as well. Go to http://www.socialsecurity.gov/ or call Social Security (800/633-4227) to get further information.
Seniors enrolled in a Medicare HMO will be subject to the rules of their provider. If you don’t like those rules, you will have to "vote with your feet" and find another HMO that works better for you.
Although there are social service agencies in most places prepared to help seniors make a decision, the only way to really get through the morass of plans, costs and variables is by going online (http://www.medicare.gov/). However, 76 percent of seniors have never used the Internet. Pharmacies and doctors are not supposed to give advice on the multitude of choices available or to steer patients into a particular plan.
In spite of a $300 million information campaign by the Centers for Medicare and Medicaid Services, a study by the Kaiser Family Foundation and the Harvard School of Public Health reveals that only 20 percent of surveyed seniors say they would enroll in a Part D program. A staggering 37 percent say they would not enroll and the rest are not sure. Most of those who will not join say the program is too confusing: 36 percent say they don't understand it at all and 25 percent say they don’t understand it very well.
Some of the seniors who indicate that they won't get into a plan cite the fact that they're not taking prescription drugs right now. This presents a problem because there are penalties for anyone not covered by a creditable plan (offered by a former employer or union) who wants to sign up later. The penalty is 1 percent per month of late enrollment. If a healthy person doesn’t need medication now and waits five years to sign up, for example, there would be a 60 percent penalty added to each month’s premium … for life.
Given the increasing penchant among doctors to treat medical conditions with drugs rather than invasive procedures, the day when even the healthiest senior will be taking significant prescriptions is just around the corner. Remember, this is an insurance program. Just as you buy insurance on your car in the hope that you will never have a wreck, so will you be buying insurance against future high drug costs with Part D coverage.
Since this is a column about your money, here are some companies likely to benefit under the plan, according to experts: Bristol-Myers, Johnson & Johnson, Roche Holding AG and Abbott Laboratories, which all have less than 20 percent of their portfolios at risk from generic substitution. Novartis and Sanofi-Aventis have a little more than 20 percent exposure. All of these companies make drugs that have less competition and higher markups, including for cancer, AIDS and Alzheimers.
Some of the companies at higher risk include Pfizer, Merck, Eli Lilly and AstraZeneca. They have more than 60 percent of their sales in classes of drugs built more on marketing than on product differentiation (for the record, I do not own any pharmaceutical stocks directly, although I am sure some are held in my mutual funds).
As an example, take common aspirin. Many companies make it, but if one has an edge in advertising and institutional marketing, that firm would be in a better position to get onto a formulary than a weaker company. The weak company might have to offer deep discounts to insurance companies to be included in their formularies, thus affecting the bottom line.
Wouldn't Bayer be in a better position to be included in a plan than a no-name generic? Advertising geared toward consumers urging them to "ask your doctor if Bayer's right for you" would outweigh the minor differences between Bayer and Brand X.
While the Brand X rep is going door-to-door trying to convince doctors to prescribe his aspirin to patients, and offering incentives for doing so, most patients are walking through the door ready to request the Bayer brand.
If insurance companies haven't included Bayer on their formularies, the doctors will be calling, trying to get their patients' choice of medication included. Eventually, enough calls should result in Bayer being added to the list of covered meds.
Drug makers are looking at $720 billion in additional sales over the first 10 years of this program. While some companies will see a boost from new users who couldn’t afford their name brand drugs before, other drugs in the same class may be offered at deep discounts to be included on the formularies. That means the rich will probably get richer and the smaller companies will suffer.
Unless you've been living in a cave, it's impossible to avoid the bombardment of pharmaceutical drug advertising on television. As companies shift from "retail," or going door-to-door visiting doctors, to "wholesale," or focusing on getting patients to ask doctors about drugs, the very nature of drug marketing has changed and can be expected to keep changing.
That this program is baffling is fast becoming universally accepted. During a recent visit to my parents’ senior community, I encountered general confusion and lack of information among other residents when I mentioned this program. Those with computer-literate children are depending on them to sort out the options. The seniors on their own were generally resigned to staying the course they were on, regardless of cost.
D is for demoralized, discouraged and disgusted.
Don Kuehn is a retired AFT senior national representative. This column is intended to increase knowledge and awareness of issues of importance to members and retirees. For specific advice relative to your personal situation, consult competent legal, tax or financial counsel. Comments and questions can be sent to dkuehn60@yahoo.com.
