Medicare drug plan: Stingy benefits, high cost

The Bush administration’s top health officials have hit the road to educate (sell) seniors on Medicare’s complex new drug benefit. A recent stop in New Hampshire was like a road show, complete with a bus painted with the Medicare logo.

But Medicare chief Dr. Mark McClellan’s sales pitch failed to mention that beneficiaries would be locked into a private drug plan for a whole year. Any time during that year, drug plans can change which drugs are covered and what prices are charged.

An important feature of the new so-called Medicare Drug Plan is this: It will not be run by Medicare at all. Insurance companies and private plans will offer prescription drug coverage to people on Medicare. At a price!

This summer or fall, those on Medicare will get a letter from the government. The letter asks, “Do you want to go into the new drug plan, called Medicare Part D?” The plan starts January 2006.

Some lucky retirees get prescription drug coverage from the companies they worked for. They can stay with their plan. Their employer will send them a letter advising if their current coverage is at least as good as Medicare Part D. Make sure you save these letters, in case your coverage changes. Later, if the plan ends, you can join Medicare Part D without penalty. Also those on Medicaid are automatically enrolled. They do not have to pay the monthly fees.

A hard decision

Most of us have a hard decision to make. If we check “No” and later decide to enter the plan, we will be penalized. We will have to pay 1 percent more per month for the rest of our lives. But if we check yes, $37 comes off each Social Security check. This monthly deduction is expected to double in the next few years. For $37 a month, it comes to $444 a year. Is it worth it?

What makes it hard to decide is that drug prices are going up so fast. The new law forbids Medicare from even trying to get lower prices. So the drug companies are free to raise prices as they want. And they have upped prices to the tune of 14 percent a year.

No savings at all

Let’s take the case of a woman with a medicine bill of $1,000 a year. If she signs up for the new program, $37 will be deducted from her Social Security check each month. She must still pay the deductible, all of the first $250 of medicines she buys. That comes to $694 she spends before she gets a nickel’s help under this new program. For the remaining $750 of medicine she needs, the plan pays 75 percent and she pays 25 percent. So she pays another $187.50, bringing the total to $881.50 out of her pocket. It appears she “saves” $118. 50. In fact, she may not save anything because the drug company has raised the price 14 percent by the end of the year. What used to cost $1,000 has gone up to $1,140. And if the insurance company drops her meds, she is in big trouble.

If you have larger medicine bills, it gets worse. You have to pay 100 percent from $2,250 up to $5,100. That’s the “donut hole” during which time you will not have any coverage.

State programs in danger

For people with incomes lower than $12,920 single, or $17,321 married, there is extra help from the program. Some states, such as Illinois, have good drug programs for low-income seniors 65 or older. Now these state programs are in jeopardy. They depend, in part, on federal funds.

Why does the new prescription drug law cost so much if its benefits are so stingy? There is a reason. Many billions will be spent for purposes other than medicines. About $55 billion will be given to companies with employee prescription drug plans to “encourage” them to continue. Even more will go to insurance companies that will run the programs. Their overhead charges are more than five times as high as Medicare’s.

Worst of all, a provision of the new law would start the privatization of Medicare itself. No wonder the Alliance of Retired Americans (www.retiredamericans.org, the source for much of the above information) is asking for total repeal of the law and replacement with “a real prescription drug benefit.”