Confusing
Choices in Medicare?
By Grace-Marie Turner
President, Galen Institute
Alexandria, VA
Everywhere seniors turn, they
find newspapers and airwaves filled with warnings
that the new Medicare drug benefit is overwhelmingly
confusing -- certainly discouraging words for
seniors who both want and need this new benefit.
But seniors should not give up. One reason they
are confused is because they have more and better
choices than anyone anticipated when the drug
benefit was being crafted by Congress.
For example, one prescription drug plan costs
as little as $1.87 a month in premiums. Others
eliminate the $250 deductible before coverage
kicks in so seniors get first-dollar coverage.
And still others are providing drug coverage in
the dreaded "doughnut hole" -- the gap
in the standard plan where insurance coverage
is interrupted between low and high drug expenses.
Congress expected that seniors would have to pay
about $35 a month in premiums for their Medicare
drug coverage, but the average premium is lower
- about $32 a month. And almost every state has
a plan with premiums of no more than $20 a month.
The trade off for seniors in having choices of
drug benefits is...having to make choices. It
could have been simple: The government could have
told seniors what they would pay and which drugs
they would get -- maybe their drugs would be on
the drug list, and maybe not. But as it is, the
choices available require them to pick the plan
that is best for them.
The reason for these surprisingly better choices
is competition: 65 different sponsors are competing
to provide the most attractive benefits at the
lowest prices. Every drug plan must cover at least
two drugs in every therapeutic class, but seniors
need to make sure the specific drugs they need
are covered by the plan they choose.
And, miracle of miracles, seniors actually know
what their options are in each of the different
plans. That's not what people are accustomed to
in our paternalistic health insurance market.
Welcome to the future.
Seniors will have to narrow down their decisions
to pick the plan that provides them the lowest
premium and the best selection where they live.
And with an average of 42 plans per region, it
takes some work.
The 1-800-MEDICARE phone lines are swamped with
seniors anxious to learn more and sign up. The
Medicare website, www.medicare.gov, also has been
inundated with visitors (more than a million the
first Sunday alone).
The Medicare agency is working feverishly to fix
problems and expand capacity. But seniors have
until May to sign up. So there's time. It's worth
it. The plans offering coverage are competing
intensely for beneficiaries to sign up, and they
are making the drug benefit even more attractive
than the one outlined by Congress:
* Zero premiums: Seniors in 44 states can pick
a comprehensive "Medicare Advantage"
medical/hospital/drug plan with no additional
drug premium (instead of the $35 monthly fee estimated
by Congress). Humana gets the prize for the lowest-priced
free-standing drug plan, coming in at $1.87 a
month in Iowa.
* No deductibles: 58% of plans will have no deductible
(instead of the $250 in the standard plan designed
by Congress).
* Filling the doughnut hole: One fourth of the
Medicare Advantage plans and one sixth of all
drug plans offer coverage in the dreaded doughnut
hole (the standard plan doesn't cover drug spending
between $2,250 and $5,100).
It's hard to deny that private sector competition
has come up with better options than the standard
benefit plan Congress designed.
How have the plans been able to do this? Tough
negotiations over drug prices, for starters. Some
major drug companies are very upset because they
have been shut out by drug plans because they
wouldn't or couldn't offer low enough prices.
In all parts of life, choice can be confusing.
But all of the drug plans in the mix are approved
by the Medicare agency to provide coverage at
least as good as that specified by Congress. And
if seniors don't like the plan they selected,
they can switch again next November.
At this point, the only bad choice is likely to
be not making any choice at all.
Grace-Marie Turner is president of the Galen Institute,
a non-profit research organization that focuses
on free-market ideas for health reform. She can
be reached at P. O. Box 19080, Alexandria, VA
22320 or galen@galen.org
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