2006-01-04 / Editorials

Confusing Choices In Medicare?

By Grace

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 [plan] 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 the 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 tradeoff 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 Web site. 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 percent 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 [Congress came up with] 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 one of the country’s experts on Medicare. a member of the Advisory Council on Health Care Quality and Research, which is part of HHS, and president of the Galen Institute, a non-profit research organization that focuses on free-market ideas for health reform.

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