Fear of Death
Elder Larks and Owls

Misunderstanding Medicare Part D

[I have posted a new story, The Question of a Woman President, this morning at blogher.org.]

category_bug_politics.gif When Medicare Part D – the prescription drug plan – was launched, very little seemed right about it. It was and still is nearly impossible to choose the most effective plan among the plethora of different drug formularies and prices from increasing numbers of insurers.

Then there is the infamous doughnut hole – the coverage gap after drug expenses of $2,250 have been reached – during which time the insured must pay full price for $3600 in drug costs. The so-called “catastrophic coverage” then kicks in, but only until the end of the calendar year when the entire procedure begins again.

But it is much worse than I thought. Call me stupid – I deserve it – because from the beginning I have misunderstood an important and devastating part of the coverage (or, rather, lack thereof). It entirely escaped my notice - until the annual EOB (Explanation of Benefits) from my Part D insurer arrived last week:

All this time, I assumed the $2,250 “initial allowance” before the doughnut hole, referred to my co-payments, that is, my out-of-pocket expenses. But no. I was shocked to learn that the $2,250 limit before the doughnut hole refers to total drug costs.

Maybe you already knew that. But Miss Smartypants here, who prides herself on her careful reading of facts, is shocked. I pay $28 per month for the one prescription drug I take and I assumed I would never hit the doughnut hole as a year’s cost to me is only $336. As it turns out, even at the full price, I won’t reach the doughnut hole, but given the price of drugs, there are very few people who will not be forced into a period of paying for the full retail price of their drugs.

Imagine you take drugs that at retail cost $600 a month, and with your Part D coverage, you pay $150 for them. If only your co-payment counted toward the initial allowance, you would not reach the doughnut hole in a year.

But because the insurance carriers count the full, retail price of the drug, you hit the doughnut hole in just under four months and the catastrophic coverage, wherein a lower co-payment prevails, does not pertain until you have paid full price for six full months.

And don’t forget that you would be paying premiums to the insurance company for the entire six months (half the policy year) during which you are paying full price for the drugs.

So on drug costs of $7200 per year, an insured pays approximately $5,100, which could be higher depending on the size of the monthly premium and the deductible. How is this good coverage, or even reasonable, for the price?

I suppose if your drugs cost $15,000 or $20,000 or more a year and you have a moderate pension in addition to Social Security, this isn’t a bad plan. But if your drugs cost that much and you are the average Social Security recipient with about $12,000 a year in benefits, Part D isn’t much help and there are elders who choose every day among life-saving drugs, food and heat.

It is long past time for the United States to catch up with the rest of the industrialized world by adopting universal healthcare. Yes, there are problems in Canada and in Great Britain and in France and elsewhere. But one-sixth of their populations is not going entirely without coverage or relying on emergency rooms for routine medical help as is so in the United States.

Perhaps a result of the disastrous Bush presidency is that universal healthcare will become an important issue in the next presidential election. Several announced candidates are saying those two words and maybe – don’t count on it – it is, this time, more than lip service to get elected.

If we can push our government into universal health coverage, it will cost every one of us more than we are paying now in taxes; ensuring that everyone of every age has access to medical care will not come free. But it will not cost us as much as private health insurance does now and it will cover every citizen including the one-sixth - think of it, ONE-SIXTH OF AMERICANS – who currently have no health coverage at all.

Comments

Many thanks for this important information...and, I think you were confused because the information was meant to be confusing.

Elizabeth from Eastchester

It is like trying to read greek-the insurance thing I mean. :)

It is like trying to read Greek-the insurance thing I mean. :)

Since Medicare Part D came in, I have been working as a volunteer trying to help seniors pick and understand Medicare Part D plans. So yes, I was aware of this. But I agree that it wasn't made abundantly clear and it took a lot of reading and digging before I came to a full understanding of this issue.

I have a chart on my web site that explains in detail how it works. You can tell from looking at this chart that the Part D plan is structured so that the most benefit that most people will get is a flat amount of approximately $1140. That represents that 75% that the plan will pay before you hit the donut hole ($1500) minus that average amount that most people pay in premiums over the year ($30/month). [Note: These are last year's numbers; the numbers have been adjusted for inflation in 2007 and I haven't yet done a new chart.]

There are many other things that are wrong with the plan. One of worst being that subscribers cannot change plans in mid-year, while the plans are allowed to change what drugs they cover in mid year.

I could go on at great length.

The only thing good I will say is that the medicare.gov web site does have a very good plan comparison tool that shows you, based on the medications you are taking, exactly what each plan will cost you through the year. This is the data I use when advising clients what plan to choose and I've found it very helpful.

Anyone with specific questions about the plan is welcome to email me at lturek at comcast dot net and I'll do my best to answer.

Ronni

I, like you, was surprised to learn about the full ramifications of the Medicare prescription drug plan. I take several medications and I reached the donut hole about November of last year having started coverage in April. To reach the donut hole the insurance company figured the total cost of the drugs I had used. To get out of the donut hole the insurance company only counted what I had paid "out of my pocket" This year I will reach the donut hole much earlier in the year since my coverage started over this January.

I also researched the plan and plans in depth and thought I understood them until I realized the information I just recounted when I reached the donut hole.

Medicare should require the insurance companies to clearly explain this because now it seems to be a bait and switch operation.

Congress could not have made the RX Plan any more complicated if they had set out to do so.

IMO Medicare itself works very well and is a good health plan.

If Congress had only planned for the RX Plan to be operated by Medicare without the insurance companies' involvement and if the plan had allowed the government to bargain with drug companies for bulk rates then all this would have been so much simplier and better.

Don't get me started.

As they say, let someone who doesn't believe in a program provide it and this is what you get. They didn't want to make it simple and a lot of the universal health care proposals are just the same with aimed at benefiting insurance companies, not the insured. We will have to very alert the next few years as they bring up proposals supposedly to help us all but in reality that are money in the pocket for corporations and given how campaigns are financed, most of the democrats are no better than the republicans on all of that. We can't afford as citizens to be ignorant as it's a big deal for taxes and truly helping those who need it.

Hi ! Can you see me ? I'm waving !

Here in UK the problems of the NHS (National Health Service) are many, but leaving people out is not (so far as I know) one of them. The main problem with regard to medicines and types of treatment is that the NHS was set up in the days when health care as we now know it did not exist. You went to the Doctor if you were ill. Now, 50 years later, expectations have risen, so that we find arguments being put forward for things like plastic surgery, and specialised drugs being provided (often in heart rending cases played up by the media) which the NHS Budget is not designed to meet.

So, politically, the question is "Do you want it ?" ("Yes") - Are you prepared to pay for it in taxes ?" ("No").

But somehow it seems to bumble along - and speaking as a satisfied and grateful "consumer" - long may it continue.

Ever thought of emigrating ? ;-)

If you thought it was bad in '06, wait 'till you see what the drug companies did in '07. Retail price increases on my wife's drug assortment for one quarter increased $920.59 that's 45.36%. I will be paying more with the insurance now than I did before the insurance was available. I was told each insurance company sets their own retail prices. They only win, we lose.

I feel suckered by Humana. I received notice my premium would increase in 2007. I failed to see the part about my "donut coverage" being discontinued except getting generic drugs for 5 percent instead of paying 100 percent. Except for that there is no difference between the 25.30 plan and the 86.50 plan. Where is the justice? How many seniors besides me are getting screwed out of 61.00 a month?

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