Beneficiaries Find Medicare Drug Benefit Wanting

Even as President Bush vows to veto any changes in the new Medicare prescription drug benefit, some policy experts in Washington and—if polls are correct—some beneficiaries are regarding the law like a birthday gift that, once unwrapped, turns out to be a lump of coal.

Bush vowed in a press conference to veto any legislation that sought to change the new prescription drug benefit, either through benefit reductions or by allowing the government to negotiate drug prices with the pharmaceutical industry. That announcement followed an outcry from both Democrats and Republicans last month when the administration acknowledged that the new prescription drug benefit is likely to cost more than $720 billion over the first 10 years.

The bill was originally forecast by the White House to cost $400 billion.

Meanwhile, policy analysts at a conference sponsored by Families USA in January described a forest of complications and potential pitfalls associated with the new benefit, especially for “dual eligibles”—those who qualify for both Medicare and Medicaid, a category into which many of the most severely mentally ill fall (see page 4).

Many at the conference emphasized the enormous amount of individual and public education that will be required to help beneficiaries navigate the complexities of the new law. And on the whole they greeted the new law not as something to celebrate, but as something to endure.

“I was hoping that I would wake up this morning and there would be news that Congress and the administration had gotten together and decided this was really a terrible mistake and a bad idea,” said Dee Mahan, deputy policy director at Families USA, in the presentation “The New Medicare Drug Law: Where Do We Go From Here?”

“Unfortunately, that's not what happened, so I'm here to talk about the ways to work with beneficiaries and things to keep in mind as you evaluate health plans in your area and help beneficiaries make decisions.”

In her presentation, Mahan echoed the problems that are likely to ensue for those beneficiaries enrolled in both Medicaid and Medicare since they will lose their drug benefit coverage under Medicaid at the same time that the new benefit under Medicare begins. To prevent an interruption in coverage, the federal Centers for Medicare and Medicaid Services (CMS) will auto-enroll all dual eligibles in a Medicare prescription drug plan, but whether it will be one that covers all the medications the beneficiary requires is likely to be a matter of Russian roulette, she said.

For many other beneficiaries, selecting the right plan is likely to require a complicated comparison of costs and benefits across multiple plans.

“The way the benefit is delivered, a voluntary benefit through a private plan, is a fundamental departure in the delivery of Medicare services,” Mahan said. “These are huge changes, and the ensuing confusion is likely to be just as huge. And the confusion is not going to be just from the changes at hand, but also because of the benefit itself.”

Mahan summarized the basic benefit for those with incomes over 150 percent of the federal poverty level: 25 percent coinsurance with a yearly cap of $2,250 after which coverage stops—the so-called “donut hole” in the benefit—and resumes once the beneficiary reaches a yearly out-of-pocket maximum of $3,600.

As for low-income beneficiaries, for whom the new law could have the greatest savings, there are several benefit levels depending on income, Medicaid status, and assets. They all have fixed-dollar copayments and do not have a gap in coverage; at the same time, this is the group likely to require the most intensive one-on-one help about which benefit plan to choose.

“Beneficiary attitudes give a little bit of insight into the task ahead,” Mahan said. “Surveys have found that beneficiaries don't know a lot about the benefit, and those who do know something have a pretty poor opinion of it.”

Mahan said a July survey by the Kaiser Family Foundation found that over half of beneficiaries had an unfavorable impression of the law. “But `impression' really is the key word, because nearly half knew so little about the law that they couldn't say whether they were really confused or not,” she said.

She added that recent experience with the new discount card, which has acted as a kind of preliminary benefit before the new prescription drug benefit begins in January 2006, serves as a template for what advocates and beneficiaries can expect.

“With the discount card there were too many choices—72 plans, about 40 national plans—making it very tough for beneficiaries to decide what was best for them,” Mahan said. “There probably won't be as many plans with this program because the plans themselves will have a lot more financial risk and a lot more at stake. But even if there are fewer, there are so many variables that people will have to sort through that even with a few plans, it can be a very tough process.”

She added that recent experience with the CMS toll-free phone service designed to provide guidance to beneficiaries has not been encouraging. Mahan referenced a General Accountability Office report that found a low rate of accuracy on answers provided by phone operators, particularly for questions pertaining to low-income assistance.

“Outreach from CMS and from the plans that were providing discount cards didn't really reach the people it needed to reach,” Mahan said.“ The standard ways that these plans use to communicate—through the Internet, mailing, television—just isn't the best avenue. What people really need is one-on-one counseling and more direct help from groups that know how to work with them and where they go to get their help.”

Mahan also expressed skepticism about the pharmacy benefit management (PBM) plans that are likely to be administering drug benefits under Medicare.

“There are a lot of things about the PBM industry that make it seem like it's not necessarily the best vehicle to be providing services to a large group of seniors, people with disabilities, or low-income individuals,” she said. “PBMs have primarily served in the employer market. They don't have a lot of experience with outreach issues relevant to this population, certainly not on a very large programmatic basis.”

Moreover, Mahan said the PBM industry is highly concentrated. “There have been a lot of lawsuits related to violations of consumer protection law, related to improperly hiking prices, and there's no price transparency in this industry. What they actually pay for drugs is a mystery and is going to remain a mystery because they are going to be negotiating with drug companies for prices and discounts and don't have to pass along any set percent of discount to those who enroll with the plan.” ▪