The Deadly Doughnut - New York Times

Tyler Cowen recommends Paul Krugman on the Medicare Drug Benefit:

The Deadly Doughnut - New York Times: Soon millions of Americans will learn that doughnuts are bad for your health. And if we're lucky, Americans will also learn a bigger lesson: politicians who don't believe in a positive role for government shouldn't be allowed to design new government programs. Before we turn to the larger issue, let's look at how the Medicare drug benefit will work over the course of next year.

At first, the benefit will look like a normal insurance plan, with a deductible and co-payments.

But if your cumulative drug expenses reach $2,250, a very strange thing will happen: you'll suddenly be on your own. The Medicare benefit won't kick in again unless your costs reach $5,100. This gap in coverage has come to be known as the "doughnut hole."... [I]f you are a retiree and spend $2,000 on drugs next year, Medicare will cover 66 percent of your expenses. But if you spend $5,000 - which means that you're much more likely to need help paying those expenses - Medicare will cover only 30 percent of your bills.... How will people respond when their out-of-pocket costs surge? The Health Affairs article argues... that it's likely "some beneficiaries will cut back even essential medications while in the doughnut hole." In other words, this doughnut will make some people sick, and for some people it will be deadly.

The smart thing to do, for those who could afford it, would be to buy supplemental insurance that would cover the doughnut hole. But guess what: the bill that established the drug benefit specifically prohibits you from buying insurance to cover the gap. That's why many retirees who already have prescription drug insurance are being advised not to sign up for the Medicare benefit.

If all of this makes the drug bill sound like a disaster, bear in mind that I've touched on only one of the bill's awful features. There are many others, like the clause that prohibits Medicare from using its clout to negotiate lower drug prices. Why is this bill so bad?

The probable answer is that the Republican Congressional leaders who rammed the bill through in 2003 weren't actually trying to protect retired Americans against the risk of high drug expenses. In fact, they're fundamentally hostile to the idea of social insurance, of public programs that reduce private risk. Their purpose was purely political: to be able to say that President Bush had honored his 2000 campaign promise to provide prescription drug coverage by passing a drug bill, any drug bill.

Once you recognize that the drug benefit is a purely political exercise that wasn't supposed to serve its ostensible purpose, the absurdities in the program make sense. For example, the bill offers generous coverage to people with low drug costs, who have the least need for help, so lots of people will get small checks in the mail and think they're being treated well.... Can the drug bill be fixed? Yes, but not by current management. It's hard to believe that either the current Congressional leadership or the Mayberry Machiavellis in the White House would do any better on a second pass. We won't have a drug benefit that works until we have politicians who want it to work.

I've been looking for something good and short on how the Center for Medicare and Medicaid Services is going to try to make this drug benefit work. It's not at all clear to me that they can.

Comments

[E]

It depends on what you mean by "make this drug benefit work."

If you mean keep the Part D plans in Part D, that's easy: Congress will bribe them. Here's how it'll play out:
1) Lots of plans enter Part D in 2006 (in fact, many have).
2) Many plans begin losing money (small market share, PhRMA screwing them, etc.) and threaten to exit Part D.
3) Congress tells CMS to increase the subsidy paid to Part D plans by 20%, 50%, whatever it takes to keep them in the program.
Don't believe me? That's exactly what's happened with Medicare managed care plans (well, not quite 20%, but in some cases nearly so).

Now, if you mean providing a drug benefit that helps those who most need it, that's a different story. And you'll have to take it up with Congress since they pretty much tied the agency's hands on how to implement Part D.

[Derelict]

Krugman has it exactly right: The Republicans as a matter of principle do not care whether any program actually works. The prescription drug plan is just one example. Today, government programs at all levels that have been designed an implemented by Republicans have proven disastrous--whether we're looking at privatized schools or big defense programs.

I think the reason for this is that the Republican philosophy is to gain power for its own sake, and thus they have neither regard for nor the ability to engage in anything that remotely resembles governance. Rather, power is used to pay back those who put Republicans in power, in order to enable the gaining of yet more power to administer yet more paybacks. With this as a foundation, is it any wonder that their programs are dysfunctional?

Remember: Government IS the problem. And if you elect me to office, I'll prove it!

[Barbara]

Two things, one okay, one terrible: Many insurers understand the lunacy of the benefit as designed by Congress and are "reshaping" it to "smooth" out the cost sharing so that there is no donut hole. In other words, they are providing an actuarially equivalent benefit that doesn't have such an all or nothing benefit structure, something they are permitted to do under the legislation. Look for full risk plans in particular to do this -- as they would bear the consequences of the additional hospitalization or other treatment necessitated by a failure to take drugs. This doesn't make the legislation okay, but if you are advising a senior you should at least know that plans like this are out there, and it may be worth it to get one with a higher monthly premium to avoid this catastrophically crazy plan design.

With respect to the original benefit, if a senior stops taking drugs, then he or she will never get out of the donut hole -- because you have to expend that money in order to get to the next benefit tier.

It really is awful, even more so when you realize that it puts seniors at more risk than the plans themselves (too complicated to explain, but it's true -- the plans are better protected than the beneficiaries from adverse risk). I've read the entire bill and understand it pretty well -- it is a textbook case in what an uphill, sisyphean battle it is to make health care markets function in any way that makes them even look like they could be free. They can't. I would gladly give up my job and go do something else if I could be sure of universal access to health care.

[Howard]

I continue to recommend to dems that we simply call for this entire bill to be overturned and start fresh on the grounds that the plan is poorly designed, too expensive, and unliked by its target audience.

since i think the dems need to raise taxes, i'd like us to be on the table with a major spending cut, and this bill, which is so awful, strikes me as an excellent place to start.

the dem position can be: let us get the house back in order, and then help us pass a good prescription drug benefit in the future.

[Gary Karr]

Here's what Krugman doesn't tell you:

-- Because of the competitive marketplace, in every state, you can get a plan that fills in the doughnut hole. So if someone in Medicare has drug costs higher than $2,000, or is worried about that, they can get a plan that has no coverage gap.

-- There are also plans with zero deductibles.

-- In ever state by Alaska, there are plans at less than $20 a month. In some places, it's less than $1.87.

Just some facts to consider.

[anne]

Barbara, please continue your important comment. I do not understand your conclusion :)

[Emma]

Howard: what part of "the bill that established the drug benefit specifically prohibits you from buying insurance to cover the gap" went by you?
My parents are dependent on Medicare. As far as we can tell (and we've looked) my sister and I are the "insurance" that will cover the doughnut hole.

[anne]

Gary Karr, please present an example of a full or supplemental drug coverage plan with no deductible for $1.87 to $20 a month.

[me]

"With respect to the original benefit, if a senior stops taking drugs, then he or she will never get out of the donut hole -- because you have to expend that money in order to get to the next benefit tier."

Unless they dont have it.

"I would gladly give up my job and go do something else if I could be sure of universal access to health care."

You are not the only one. I can't find a job in Atlanta and I can't move from Atlanta because my wife has the healthcare.

Krugman says "But guess what: the bill that established the drug benefit specifically prohibits you from buying insurance to cover the gap."

Gary says "Because of the competitive marketplace, in every state, you can get a plan that fills in the doughnut hole."

Now someone has it wrong and I don't know who.

[Gary Karr]

It varies from state to state, so here's an example:

In Minnesota, you can get a basic prescription drug plan for $1.87 a month. That one offers the standard Medicare benefit, with a $250 deductible and the so-called doughnut hole. Not everyone would want that plan, of course, but if you had low drug costs and just wanted basic protection against catastrophic costs, it could meet that need. Remember that people were saying a year ago that plans would cost $37 for the same kind of coverage.

If you lived in Minnesota and wanted coverage without a deductible and no doughnut hole, you can get them. There's a couple of plans that cover both generic and brand-name drugs in that coverage gap, and a few other plans that cover the only generics.

It's all right here:
http://www.medicare.gov/medicarereform/mapdpdocs/PDPLandscapemn.pdf

[anne]

Paul Krugman:

"The smart thing to do, for those who could afford it, would be to buy supplemental insurance that would cover the doughnut hole. But guess what: the bill that established the drug benefit specifically prohibits you from buying insurance to cover the gap. That's why many retirees who already have prescription drug insurance are being advised not to sign up for the Medicare benefit."

Precisely so.

[anne]

http://www.medicare.gov/medicarereform/mapdpdocs/PDPLandscapemn.pdf

Thank you, Gary Karr. This is very interesting and possibly especially promising. Though the New York Times reports that the Medicare law does not allow purchase of supplemental drug coverage, Minnesota evidently is offering a significant range of supplemental drug coverage plans.

[anne]

How are we to reconcile what I have taken as the Medicare drug plan denial of the right to use supplemental insurance drug plans, and the evident availability of such plans? What am I missing? What is Paul Krugman missing?

[Gary Karr]

Anne:

No, it's not Minnesota that's offering those plans. Those are the plans being offered under Medicare. And there are similar instances all across the country.

Gary

[anne]

Again, thank you Gary Karr:

So, the supplemental drug coverage plans are begin offered by various insurers within the Medicare program on a state by state basis. Then, I am prepared to be entirely pleased by the Medicare drug coverage plan from the perspective of recipients. I have always thought the cost problems that are liable or likely to appear can be readily dealt with in time. I wanted the principle of Medicare drug coverage established, and was satisfied from that perspective. We have a start. Still, I wonder if we are missing something.

[howard]

Emma, i believe you have me confused with Gary.

and Gary, i've looked at your link, and i'm not sure what you're telling us: off the one page you've posted, where is the "doughnut" being filled in? (i'd be happy to learn more, mind you, so if you've got some further links or insight, please lay them out).

[me]

"f you lived in Minnesota and wanted coverage without a deductible and no doughnut hole, you can get them."

I see no deductable, I do not see no donut.

[Dubblblind]

Might I suggest another avenue for filling the doughnut hole. It's called the mid-term elections. The Dems have an opportunity now and they need all the ammunition they can get. This should become one of their talking points. Not only is it about helping a significant constituency but about revealing the Rethugs values and pattern of governance which seeks to benefit big business at the expense of ordinary folk.

[anne]

Could the solution be that a person eligible for Medicare can choose the drug coverage plan or not. If you choose the Medicare drug coverage, then you are not allowed to add a supplemental plan to fill in gaps. If you do not choose the Medicare plan, then you can purchase drug coverage from your present health care insurer. I think that is the solution.

[me]

anne, I think part of the problem will be that now the system has been distorted by the new law. My mother has lost her drug coverage through the railroad and now has to come under medicare.

At this point it is unlikely that companies would go back and reinstate those programs.

[anne]

There is the solution. A Blue Cross drug coverage plan can be chosen for $54 or $100 a month. The Blue Cross plan has no deductible, but includes a copay for each prescription. The question then is how much is the copay for the 2 drug coverage plans? The copays also appear to be tiered. Then, a person must compare the total cost of a current drug plan with the Medicare plan cost.

[me]

anne, that was my point, there is no current drug plan, it is gone. It is medicare or none. My mother has lost her good coverage.

"On January 1, 2006, Medicare’s new prescription drug coverage will go into effect. As a result, your current plan, GA-23111 Plan D will no longer provide you with a prescription drug benefit as of that date. Only the prescription drug benefit will be discontinued from your plan; all other health benefits will remain unchanged.

Under GA-23111 Plan D, UnitedHealthcare worked with Medco Health Services to provide prescription drug services. With drug coverage under GA-23111 Plan D ending, UnitedHealthcare will no longer continue its relationship with Medco for GA-23111."

[anne]

ME

Agreed. But, your mother has a health care provider under Medicare. Possibly, Blue Cross. Then, your mother can choose to buy drug coverage under Blue Cross or under Medicare. Both coverages cannot be bought. What then does the $54 a month Blue Cross drug plan cover of say $100 a month in prescriptions? What of prescriptions that run $1,000 a month? I am beginning to understand. We must look to specific cases.

[johnchx]

Gary Karr and Paul Krugman are both correct.

The key thing to understand is the distinction between "Original Medicare" and "Medicare Advantage."

Original Medicare is the traditional government-operated, fee-for-service program with which most people are familiar. Many participants in Original Medicare also purchase so-called Medigap insurance, which covers some or all of the costs not paid by Original Medicare.

Medicare Advantage is the current name for what used to be called "Medicare + Choice", the program that allows individuals to, in effect, get their Medicare from private insurers rather than directly from the government. Typical Medicare Advantage policies provide the coverage provided by Original Medicare PLUS Medigap, along with various other features and/or limitations. There are Medicare Advantage policies structured as HMO's, PPO's, and traditional fee-for-service.

The restriction that Krugman is talking about applies to Medigap insurance, which is purchased (only) by participants in Original Medicare. It does NOT limit the ability of Medicare Advantage providers to offer "no-doughnut" policies.

Humana, for example, will offer "Humana PDP Complete," with no doughnut:

http://www.humana-medicare.com/pdplanding.asp

In effect, Mediare Part D is structured (deliberately) to tilt the playing field against the traditional government program version of Medicare, giving Medicare Advantage providers flexibility that it denies to providers of traditional Medigap policies.

[anne]

ME

Then you are clearly showing that a Medicare recipient will indeed not be able to purchase supplemental drug insurance. Paul Krugman appears to be right as usual. I wish we had been wrong. You are always excellent :)

[me]

Through the union she has United Healthcare that pays what medicare does not. That used to include a prescription drug plan. It no longer includes a drug plan. She must now find a new plan for prescriptions. She doesn't live in Mn and the few plans available in Ohio do not say there is no donut. Since she takes several prescriptions, she is a big loser.

[anne]

Then, John Chx please continue with your description. What you appear to be showing us is that the law was designed to either push Medicare recipients to a private provider or offer a limited drug benefit to those who choose traditional Medicare coverage. Please continue.

[Gary Karr]

Actually, John, you're not quite accurate.

The prescription drug plans AND the Medicare Advantage plans that will be covering prescriptions next year BOTH can offer coverage in the so-called doughnut hole.

There are people who do not like Medicare Advantage in general. But Medicare Advantage plans as a whole save people in Medicare about an average of $100 a month in out of pocket expenses. Not sure what's wrong about that, but regardless, everyone still has a choice.

To sum up:
If you are in Medicare, starting next year you can get prescription drug coverage, even if you don't want to join Medicare Advantage.

You can buy a plan that covers the "doughnut hole" and it doesn't have to be a Medicare Advantage plan.

Gary

[anne]

ME

Again, we are understanding more but must read more now.

[Gary Karr]

ME,

Actually, there are plans in Ohio that cover the doughnut hole. They are right here:

http://www.medicare.gov/medicarereform/mapdpdocs/PDPLandscapeoh.pdf

If you'll look on that chart, you'll see there's at least one that covers brand-name and generics through the gap, and a few that cover generics only.

And here are Medicare Advantage plans, which might be something to look at too:

http://www.medicare.gov/medicarereform/mapdpdocs/MALandscapeoh.pdf

If you call 1-800-MEDICARE, they can help you further if she is covered by Medicare.

Gary

[johnchx]

Gary: "You can buy a plan that covers the 'doughnut hole' and it doesn't have to be a Medicare Advantage plan."

Are you saying that a participant in Original Medicare can purchase a Medigap policy that eliminates the doughnut hole?

If so, can you name the provider of such a Medigap policy and a link to a description?

[johnchx]

Oops...it looks like Gary's right after all. You *can* buy a stand-alone prescription drug plan, even if you're receiving Original Medicare. The Humana plan I linked to above is available in this fashion.

[cdunc]

Stepping back from this discussion for a second, isn't it more than a bit absurd that the political status quo forces us serious to inquire whether it is legal or illegal for sick seniors to purchase "Medigap" insurance to cover "the doughnut hole"? Sometimes I think Rube Goldberg must have designed our nation's health system.

[johnchx]

cdunc: "Sometimes I think Rube Goldberg must have designed our nation's health system."

I couldn't agree more! That's been the contention of those of us who favor a single-payer structure all along. :-)

For those looking to do more reading, the text of the law itself is available here:

http://www.cms.hhs.gov/medicarereform/

A summary prepared by the Congressional Research Service is here:

http://opencrs.cdt.org/document/RL31966/

As far as I can make out, Medigap policies are in fact NOT permitted to provide prescription drug coverage. See Section 104 of the Act.

However, individuals are allowed to enroll in stand-alone private insurance for their Part D coverage. This is a sort of "mini-Medicare Advantage" policy, covering only Part D. Apparently, they can remain enrolled in Original Medicare for their Part A and B coverage, and their existing Medigap policies can remain in force (with the exception that any Medigap coverage for prescription drugs is dropped).

[Barbara]

Coverage cannot avoid the donut hole's financial implications. All plans must be actuarially equivalent to the cost of what a benefit plan design would have been with the donut hole, the issue is how they structure the financial responsibilities under the plan. You could have a higher premium and completely close the donut hole; or you could have higher copays and no donut hole, etc. But a plan can't eliminate the donut hole as an actuarial matter.

The premium is set by the plans based on their assumptions about the costs that they will incur under the plan, in conjunction with a benchmark premium established by the federal government. Seniors pay 29% of benchmark premium, plus or minus the difference between the plan's estimated premium needs compared to the benchmark. At this point, nobody REALLY knows what those costs will be, but there is some reason to believe that the plans may be lowballing it right now, because, they aren't really at major risk until several years into the program -- there are reinsurance and risk corridor obligations that were undertaken by the federal government to offset any major risk of loss, at least at the beginning, in order to entice plans to enter the market, and these enticements seem to be working.

As for MA versus Medigap: MA plans that offer the Part D benefit (charmingly called MAPD plans) have to abide by the same actuarial principles that apply to the Part D stand alone plans. They may "supplement" basic Part D coverage only on the same basis that Part D plans do, that is, via actuarial equivalence. Because these plans are at risk for the total cost of non Rx care (which will not be offset by risk sharing or subsidized reinsurance), they are more likely to come up with a benefit design that smooths the donut hole in order to avoid hospital expenses. Congress did indeed prohibit the sale of supplemental insurance to close the donut hole, however, employer based coverage may close the donut hole. So there may be some confusion on that front.

And yes, if a senior can't afford to pay the donut hole expenses, for all intents and purposes, they won't get any additional coverage under Part D no matter how great their drug needs are, unless they also qualify for low income needs based aid.

[Martin James]

One of the confusions is in terminiology.

Drug coverage is not allowed to be offered in new "Medicare Supplement or MediGap" policies. However, the new plans (PDPs) are allowed to offer enhanced (donut filing)coverage.

The case that ME describes of a union or employer change is not something that was mandated by the new law, it was a decision by the employer or union. Likely, the coverage was eliminated because it will be less expensive under a new Part D plan.

The irony is that the whole donut approach was included in an attempt to maintain employer participation in retiree coverage.

It doesn't make good sense but the complaints about the quality of the new coverage are greatly exaggerated.

Krugman also didn't talk a lot about how the low income people are exempt from the donut hole and much of the copays.

[anne]

Barbara, thank you. Then, the only way to close the doughnut hole from $2250 to $5100 in drug costs is to have qualified for "low income needs based aid" or to have employer based health care coverage.

John Chx, thank you as well. As I read, I am trying to simplify the coverage problem. Medicare Part D is still a little trouble, so I am going through this.

Evidently Paul Krugman is correct in overview however.

[anne]

Martin James:

"It doesn't make good sense but the complaints about the quality of the new coverage are greatly exaggerated."

Please explain this sentence. Are you assuming then that low income people will not be subject to the doughnut hole, while others will find drugs more affordable even if subject to the full payment gap from $2250 to $5100? I though this initially and supported the bill on this basis.

[anne]

Trying again, and I mean to keep on till I understand, Medicare recipients will be able to receive payment help of 66% on the first $2250 in drug expenses. This is a true help. Then comes the doughnut hole. From $2250 to $5100 there is no drug coverage, though low income people can apply for aid. Then, coverage is full from $5100 on.

Then, for a person with $5100 in drug costs there will be an actual expense of a little more than $3700. Am I correct?

[anne]

If I am correct middle class Medicare recipients gained a drug benefit of about $1400 on the first $5000 in drug expenses and full coverage fron then on. This still seems like a tolerable start, though I would always hope for more coverage.

Low income Medicare recipients can apply for additional aid.

[anne]

I think we have a flawed bill that a recipient will still gain from even initially. The cost problem for the program as a whole will appear more quickly than otherwise because Medicare expressly cannot bargain with drug companies over prices as is done in other public health programs including that for our veterans.

[anne]

Brad Delong:

"I've been looking for something good and short on how the Center for Medicare and Medicaid Services is going to try to make this drug benefit work. It's not at all clear to me that they can."

Now there are all sorts of tricks to learn, such as the denial of "charity" from drug companies to Medicare recipients who accept the drug plan, but the question is whether a person wishes $1400 of insurance on the first $5100 of drug expenses and full coverage thereafter.

There is so far fine response by organizations offering the Medicare drug coverage, and Medicare has assured what a fine research physician tells me is a reasonable listing of drugs.

The catch will come later as costs of the program increase.

[howard]

Anne, you are an exceptionally intelligent person who is having trouble understanding this measure.

i'm not a complete idiot, and i'm having trouble understanding this measure.

many of the other posters here are clearly very bright and well-informed, and they're having trouble understanding this measure.

My parents, who are no dopes, are having trouble understanding this measure, and they're seniors (and, frankly, none of their friends can understand it either).

I appreciate the nose under the tent aspect of this legislation that you like, even if you question the legislation itself, but in my mind, i'd rather have a good, simple, affordable bill a few years down the road than a poorly designed, unaffordable one now, partly because poorly designed governmetn programs (as krugman implies) rebound in the public mind against government in general, not against the people who wrote the legislation.

[anne]

Agreed, completely :) You are sharp as a tack, so do not fret. We are lost for there is reason to be lost. I like you in any event.

[howard]

anne, too generous, but it's always fun to swap thoughts with you....

[dilbert dogbert]

Can someone explain to me why the only information I have recieved on this has been sent out by the US Chamber of Commerce??? What the hell is their interest in the Medicare Drug plan?? They certainly don't have an interest in my being well enformed or understanding any of the ins and outs of the plan.

[Dubblblind]

Dear Anne,

You pay 100% of the first $250 (the deductible) - $250

You pay 25% of the next $2000 (from $250 to $2250) - $500

You pay 100% of the next $2850 (from $2250 to $5100) - $2850

for a total of $3600 out of pocket on an expenditure of $5100.

You continue to pay 5% "or a small copayment" for any additional expenditures over $5100 ($3600 out of pocket) during the calendar year.

You also pay $37 per month for the plan (estimated, depending on the plan) for an additional out of pocket of $444.

Your grand total out of pocket for $5100 of drugs in a calendar year is $4044.

[anne]

Dubblbind:

You pay 100% of the first $250 (the deductible) - $250

You pay 25% of the next $2000 (from $250 to $2250) - $500

You pay 100% of the next $2850 (from $2250 to $5100) - $2850

for a total of $3600 out of pocket on an expenditure of $5100.

You continue to pay 5% "or a small copayment" for any additional expenditures over $5100 ($3600 out of pocket) during the calendar year.

You also pay $37 per month for the plan (estimated, depending on the plan) for an additional out of pocket of $444.

Your grand total out of pocket for $5100 of drugs in a calendar year is $4044.

[Then, the complete cost is $1194 for the first $2250 of drug expenses,

$4044 for the first $5100 of drug expenses.]

[anne]

Dubblbind, Dilbert and Howard:

Yes, I have been given program descriptions recipients received and am discouraged. Darn. You are as always exact and clear.

[anne]

Richard:

In Australia, the Pharmaceutical Benefit Scheme (PBS)covers over 2600 prescription drugs. Medicines have to be of proven efficacy (not just drug company hyperbole)before being included in the scheme.

It subsidises the cost of prescription drugs to ALL Australians. High and middle income earners pay a flat rate of A$28.60 (about US$21)per drug per presciption. Concession card holders (low income earners (below approx.A$30,000 pa) and pensioners) pay a flat A$4.60 (US$3.40).

Once your FAMILY'S prescription costs reach A$875 in a year, you then qualify for the concession card rate of A$4.60 per script on all subsequent prescriptions in that year. If you are already a concession card holder,once your FAMILY'S prescription costs reach A$239 in a year all subsequent prescriptions are free.

In Australia we believe no one should suffer adverse health consequences and/or possibly die when efficacious medicines are available, just because they can't afford them.

Just another reason why Australia is a fantastic place to live! And despite such government largesse we are still racking up annual government surpluses of about A$13 billion and have almost no government debt.

[me]

It is too bad the US does not see the wisdom of a plan like this.

[Gary Karr]

Anne and Dbbleblind are working off descriptions of the "standard" benefit. But you can do better if you just examine the plans offered, and you can lower your out-of-pocket costs substantially.

As I said before, you can get a plan that fills in that gap or "doughnut hole."

The $37 average premium figure is erroneous. It's $32. But in every state but Alaska, you can get a plan for less than $20. In several northern Midwest states, the cheapest premium is $1.87.

Keep in mind, also, that this is insurance. So not only does it help you with drug costs now, it protects you against them in the future. And if you already have good coverage from a former employer or union, you probably should just keep it.

Gary

[lise]

Gary, could you list some addresses where we can find the data you cite. Thank you.

[Dubblblind]

$37 is the government's own figure. I have seen $32 quoted elsewhere. Clearly this is the ballpark, no need to quibble. While it's nice to know there are plans that may, in fact, be more attractive than the government's, I'm sure we'd all like to see the government do better, and more to the point, the government *can* and *should* do better.

[Dubblblind]

lise, you may want to try looking here:

http://www.medicare.gov/MPDPF/Public/Include/DataSection/Results/ListPlanByState.asp?dest=Nav|Home|State|ListPlanByState#TabTop

[anne]

http://www.medicare.gov/MPDPF/Shared/Static/Resources.asp?dest=Nav|Home|Resources|Resources#DrugPlans

What are Medicare Prescription
Drug Plans?

Starting January 1, 2006, new Medicare prescription drug coverage will be available to everyone with Medicare. Everyone with Medicare can get this coverage that may help lower prescription drug costs and help protect against higher costs in the future. Medicare Prescription Drug Coverage is insurance. You choose the drug plan and pay a monthly premium.

There are two types of Medicare plans that provide insurance coverage for prescription drugs. There will be prescription drug coverage that is a part of Medicare Advantage Plans and other Medicare Health Plans. You would get all of your Medicare health care through these plans. There will also be Medicare prescription drug coverage that adds coverage to the Original Medicare Plan, and some Medicare Cost Plans and Medicare Private Fee-for-Service Plans. These plans will be offered by insurance companies and other private companies approved by Medicare.

Like other insurance, if you join a plan offering Medicare drug coverage there is a monthly premium. If you have limited income and resources, you may get extra help to cover prescription drugs for little or no cost. The amount of the monthly premium is not affected by your health status or how many prescriptions you need. You will also pay a share of the cost of your prescriptions. All drug plans will have to provide coverage at least as good as the standard coverage, which Medicare has set. However, some plans might also offer more coverage and additional drugs for a higher monthly premium.

If you have limited income and resources, you may be able to get help with drug plan costs.

[anne]

http://www.medicare.gov/MPDPF/Shared/Static/Resources.asp?dest=Nav|Home|Resources|Resources#PlansCost

How Much Will the Plans Cost?

When you get Medicare prescription drug coverage, you pay part of the costs, and Medicare pays part of the costs. You pay a premium each month to join the drug plan (generally around $37 in 2006 for standard coverage). If you have Medicare Part B, you also pay your monthly Part B premium. If you belong to a Medicare Advantage Plan or a Medicare Cost Plan, the monthly premium you pay to the plan may increase if you add prescription drug coverage.

Your costs will vary depending on which plan you choose. Your plan must, at a minimum, provide you with a standard level of coverage as shown below. Some plans offer more coverage or lower premiums.

Standard Coverage (the minimum coverage drug plans must provide):

If you join in 2006, for covered drugs you will pay

a monthly premium (varies depending on the plan you choose, but estimated at about $37).

the first $250 per year for your prescriptions. This is called your "deductible."

After you pay the $250 deductible, here's how the costs work:

You pay 25% of your yearly drug costs from $250 to $2,250, and your plan pays the other 75% of these costs, then

You pay 100% of your $2,850 in drug costs, then

You pay 5% of your drug costs (or a small copayment) for the rest of the calendar year after you have spent $3,600 out-of-pocket. Your plan pays the rest.

[anne]

http://www.medicare.gov/Library/PDFNavigation/PDFInterim.asp?Language=English&Type=Pub&PubID=11120

No new Medigap policies with prescription drug coverage can be sold starting January 1, 2006.

[Hedley Lamarr]

What's with the steep penalty for not signing up in the beginning? Do the drug companies get much of their kick-backs from the initial subscribers? Else, I can see no reason for this.

[anne]

http://www.nytimes.com/2005/11/13/national/13drug.html?ex=1289538000&en=11b7be5e94088b5c&ei=5090&partner=rssuserland&emc=rss

November 13, 2005

Confusion Is Rife About Drug Plan as Sign-Up Nears
By ROBERT PEAR

WASHINGTON - Enrollment in the new Medicare drug benefit begins in three days, but even with President Bush hailing the plan on Saturday as "the greatest advance in health care for seniors" in 40 years, large numbers of older Americans appear to be overwhelmed and confused by the choices they will have to make.

"I have a Ph.D., and it's too complicated to suit me," said William Q. Beard, 73, a retired chemist in Wichita, Kan., who takes eight prescription drugs, including several heart medicines. "I wonder how the vast majority of beneficiaries will handle this. I fervently wish that members of Congress had to deal with the same health care program we do."

Mr. Beard was interviewed at First United Methodist Church in Wichita, where he and 100 other members of an adult Sunday school class recently received a two-hour explanation of the drug benefit from a state insurance counselor.

Confusion was a dominant theme at education and counseling sessions held over the last two weeks in Wichita and in Glen Burnie, Md.; Fairfax, Va.; Urbana, Ohio; and Santa Rosa, Calif.

"The whole thing is hopelessly complicated," said Pauline H. Olney, 74, a retired nurse who attended a seminar at a hotel in Santa Rosa, north of San Francisco.

The drug benefit, estimated to cost $724 billion over 10 years, is the biggest expansion of Medicare since its creation in 1965 and is often described as Mr. Bush's biggest achievement in domestic policy.

Bush administration officials and other backers of the plan say the new program can cut drug costs in half for a typical beneficiary, to $1,120 a year, with much greater savings for low-income patients....

[Bob Young]

Mr. Krugman needs to check what PDP plans are available. Humana offers a plan nationwide that DOES cover the "Doughnut Hole" for both generics and brand name drugs. You don't even need to know what you are paying for your drugs now, but it helps. You pay nothing but co-pays until your out of pocket expenses reach $3,600. After that, you pay only 5% of the cost of the drug. Be sure to check mail order pricing. Savings can be large. Not everone needs this much insurance. Run your medications at www.medicare.gov before selecting a plan then cross-check the results with the insurance company. (The plan finder still has some bugs.)

[anne]

http://www.humana-medicare.com/pdplanding.asp

Humana will introduce three new Medicare prescription drug plans:

Humana PDP Standard:

A basic plan, equal to the federal government's minimum requirements. You have a $250 deductible; the plan then pays 75 percent and you pay 25 percent. If your drug costs rise above $2,250; you pay 100% of your drug costs until you've spent $3600 on covered drugs. After that, the plan pays 95 percent and you pay 5 percent.

Humana PDP Enhanced:

Broad coverage with copayments to help you manage your costs with no deductible to pay. If your drug costs rise above $2,250, you pay $100% of your drug costs until you’ve spent $3,600 on covered drugs. After that, the plan pays 95% and you pay 5%.

Humana PDP Complete:

Extensive coverage with no coverage gap, no deductible and low copayments to help save you money. This plan offers protection up to catastrophic limit.

[me]

Paul Krugman continues his series on health care.

When I posted excerpts from your last column, some people claimed in comments that it is possible to cover the doughnut hole. Is it?

Many better-off retirees have relied on Medigap policies to cover gaps ... But that straightforward approach, which would make it relatively easy to compare drug plans, can't be used to fill the doughnut hole because Medigap policies are no longer allowed to cover drugs. The only way to get some coverage in the gap is as part of a package in which you pay extra - a lot extra - to one of the private drug plans delivering the basic benefit. ...

http://economistsview.typepad.com/economistsview/2005/11/paul_krugman_a_.html

[anne]

Thank you, ME :)

http://economistsview.typepad.com/economistsview/

November 18, 2005

Paul Krugman: A Private Obsession
By Mark Thoma

Paul Krugman continues his series on health care. In this column, he examines the way in which the drive for privatization has resulted in confusion and higher costs. He starts by taking a look at the new Medicare plan:

A Private Obsession, by Paul Krugman, NY Times: "Lots of things in life are complicated." So declared Michael Leavitt, the secretary of health and human services, in response to the mass confusion as registration for the new Medicare drug benefit began. ...

But why is the new drug benefit so complicated and confusing?

One reason the drug benefit is so confusing is that older Americans can't simply sign up with Medicare... They must, instead, choose from a baffling array of plans offered by private middlemen. ...

What caused that?

The Medicare drug benefit is an example of gratuitous privatization on a grand scale. Here's some background: the elderly have long been offered a choice between standard Medicare, in which the government pays medical bills directly, and plans in which the government pays a middleman, like an H.M.O., to deliver health care. The theory was that the private sector would find innovative ways to lower costs while providing better care.

Did competition from the private sector work as theory suggested?

The theory was wrong. A number of studies have found that managed-care plans, which have much higher administrative costs than government-managed Medicare, end up costing the system money, not saving it. ...

If it costs more, why continue down this road?

[P]rivatization, once promoted as a way to save money, has become a goal in itself. The 2003 bill that established the prescription drug benefit also ... went even further: ... To receive the drug benefit, one must sign up with a plan offered by a private company. As people are discovering, the result is a deeply confusing system because the competing private plans differ in ways that are very hard to assess. The peculiar structure of the drug benefit, with its huge gap in coverage - the famous "doughnut hole" I wrote about last week - adds to the confusion.

When I posted excerpts from your last column, some people claimed in comments that it is possible to cover the doughnut hole. Is it?

Many better-off retirees have relied on Medigap policies to cover gaps ... But that straightforward approach, which would make it relatively easy to compare drug plans, can't be used to fill the doughnut hole because Medigap policies are no longer allowed to cover drugs. The only way to get some coverage in the gap is as part of a package in which you pay extra - a lot extra - to one of the private drug plans delivering the basic benefit. ...

It sounds as though your main objection is that there are too many plans and they can't be directly compared due to inherent confusions built into the system. Won't the private sector work this out over time as the market process moves to deliver information more efficiently through advertising and other means?

[C]onfusion isn't the only, or even the main, reason why the privatization of drug benefits is bad for America. ... Everything we know about health economics indicates that private drug plans will have much higher administrative costs than would have been incurred if Medicare had administered the benefit directly. It's also clear that the private plans will spend large sums on marketing rather than on medicine. I have nothing against Don Shula, the former head coach of the Miami Dolphins... But do we really want people choosing drug plans based on which one hires the most persuasive celebrity? ...

Are there any other benefits besides lower administrative costs from delivering the benefit directly through Medicare?

[C]ompeting private drug plans will have less clout in negotiating lower drug prices than Medicare as a whole would have. And the law explicitly forbids Medicare from intervening to help the private plans negotiate better deals.

Who designed such a system?

Last week I explained that the Medicare drug bill was devised by people who don't believe in a positive role for government. An insistence on gratuitous privatization is a byproduct of the same ideology. And the result of that ideology is a piece of legislation so bad it's almost surreal.

I, along with almost all economists, believe in competitive markets. I believe in markets so much I want to fix the broken ones. There is market failure in the provision of health care and no amount of adherence to an ideology will make them work.

[anne]

Mark Thoma has posted an especially important analysis. Person on person has claimed that drug coverage can be readily and cheaply gained that will cover the gap in Medicare coverage from $2050 to $5100. Looking to the claims, Paul Krugman is right. The gap is real and ominous, and the confusion needlessly caused by competing claims by private insurers who are in essence offering the same Medicare drug policies.

[anne]

What should be emphasized is that both Medicare and Paul Krugman described the new drug program clearly, and clearly pointed to the gap in coverage from $2050 to $5100, but private insurance companies were continually confusing or deceptive in allowing the belief that the doughnut hole could simply be fulled. Of course, there may have been a deception by a few people who expressly argued the doughnut hole did not esist.