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Seniors Rush to Sign Up for Medicare’s Drug Benefit Before Deadline

May 15, 2006 at 3:45 PM EDT

RAY SUAREZ: The Bush administration made one last push today to persuade seniors to sign up for Medicare’s drug benefit before a financial penalty kicks in. This afternoon, the first lady and top health officials paid a visit to Shiloh Baptist Church in Washington, D.C., where workers counseled seniors about the program, called Medicare Part D.

Afterward, Health and Human Services Secretary Mike Leavitt explained how to enroll before the midnight deadline.

MIKE LEAVITT, HHS Secretary: There are just three easy steps: Get your drugs together; then, find your Medicare card; and then call 1-800-MEDICARE. And there will be people there who will help you choose a plan. In less than 30 minutes, you can choose a plan.

Now, today is the final day. Wait times might be a little longer than they have been in previous days. But if you’ll stay on the phone, we’re going to make sure that we get everyone who attempts to sign up enrolled. More than 37 million people now have the benefit of prescription drug coverage in our country.

Assessing the program thus far

RAY SUAREZ: To take a closer look at where the drug plan stands and what we can anticipate as it moves forward, I'm joined by Dan Mendelson, president of Avalere Health, a policy research firm that works for government, industry and non-profit groups. For the record, Mr. Mendelson sits on the board of directors for Coventry Health Care, an insurance provider for the Medicare drug plan.

And Ron Pollack, executive director of Families USA, a health care advocacy group.

Dan Mendelson, let me start with you. Looking over all of it, the initiation of the program, the signup period, as we approach the deadline, how has it been working so far?

DAN MENDELSON, President, Avalere Health: Well, there are about 43 million Medicare beneficiaries. And according to our research, about 16 million actually needed to go out and do as Secretary Leavitt suggested, figure out which plan to go into and sign up. And it appears that about 10 million have and about 6 million haven't.

RAY SUAREZ: So is that a good result, bad result? How do you see it?

DAN MENDELSON: I guess that depends on how you look. I mean, it's about a third of the people have not signed up; about two-thirds have.

And I think, well, you know, one other thing that has been notable is that Congress created this market place. And the plans came, and they offered very robust offerings of benefits. There are about 3,000 plans nationally being offered by about 90 different companies, so there certainly are a lot of choices.

RAY SUAREZ: Ron Pollack, how do you see it?

RON POLLACK, Executive Director, Families USA: Well, I'm very disappointed with how this program is going. I'm particularly concerned about low-income seniors.

You know, when this program was started, the president, the speaker of the House all said at a minimum this program was really going to be helpful for low-income seniors, and what we've found is quite different. For the seniors who are eligible for special subsidies, three out of four of those seniors are not getting those subsidies today, so that's terribly disappointing.

Reaching low-income seniors

RAY SUAREZ: But for various reasons? Why three out of four?

RON POLLACK: It's a variety of reasons. I'll give you a few. One is that these seniors have to go through two different certification systems, whereas all other seniors only go through one.

Low-income seniors first have to go to a Social Security office to demonstrate that they are poor. Then, they can sign up for a private plan.

There has been, as you know, tremendous confusion with this program. And for low-income seniors, this is probably more complex for them. Many of them have a lesser education level; they don't have as much of an access to a computer. So a lot of this low-income seniors who are afflicted even worse than seniors generally.

But then there's yet another group. This is the poorest of the poor. These folks are so poor that they qualify for both Medicaid and Medicare. That's why they're sometimes called dual-eligibles. They're eligible for both programs.

This group of folks used to get drug coverage through the Medicaid program. That ended on December 31, and they were automatically enrolled in a private plan. Several things happened to them when that occurred.

First, the coverage that they get, the drugs, are much more restrictive than the drugs they used to get under Medicaid. Secondly, their out-of-pocket costs are greater. And, lastly, there was tremendous confusion during this transformation, and a lot of seniors, at least for some period of time, didn't get the drugs that they needed.

RAY SUAREZ: Dan Mendelson, why is it so hard to reach low-income seniors, both in the educational phase to tell them what's out there, and then the signup phase to get them in the door?

DAN MENDELSON: It's just tremendously difficult to find them, communicate with them. Many don't speak English. You know, it's a population where there's a lot of transients. And it is very, very difficult to reach out to low-income seniors.

You know, I would say that many of the low-income seniors though are getting coverage that is much better than what they had before. Many didn't have coverage before. And there certainly are millions of low-income seniors who have enrolled.

And the dual-eligibles, those who are, as Ron had indicated, both Medicare- and Medicaid-eligible are signed up and should be receiving a benefit at this point.

RAY SUAREZ: Low-income seniors and Katrina victims, I think both, don't have to worry about tonight's midnight deadline, right?

DAN MENDELSON: That's right. Anyone who is eligible for subsidies, and that would be those who have low incomes but are not eligible for Medicaid, will not be pay any penalties, but it's the higher-income seniors that, as of tomorrow, will be paying significant penalties if they enroll late.

Facing the penalties

RAY SUAREZ: Significant penalties, Ron, or just ones that go up the longer you don't apply?

RON POLLACK: Well, what the penalties are, 1 percent per month beyond May 15th that you enrolled. So the next enrollment period actually enrolls you for January 2007. So those folks automatically will have a 7 percent penalty seven months from now, to January 1.

RAY SUAREZ: So if you miss tonight's deadline, you're going to get slapped with a 7 percent surcharge on top of what you pay?

RON POLLACK: Yes. And what's critically important to understand is that penalty isn't a one-time penalty; that's going to stick with you for the rest of your life. Every year when you enroll in the program and you pay the premium, you'll have to pay this surcharge, this penalty.

Now, somebody who delays, say, two years rather than seven months, they're going to experience a 24 percent penalty, so it could be rather significant.

RAY SUAREZ: Dan Mendelson, is there political pressure mounting to find some wiggle room on those penalties, perhaps not levee them the first year?

DAN MENDELSON: Sure, there is, and there has been a lot of discussion nationally. But, you know, it's expensive, because the government will reap some very significant revenues from these penalties. And I think that, when this gets discussed politically, the members of Congress are going to have to decide whether they want to abate the penalty or whether they want to spend the money on something else, maybe even making the benefit more generous. So I think it's going to be very difficult to go back and reassess these penalties.

Problems with the rollout

RAY SUAREZ: Both you were involved in the rollout and watched it very closely. Is that a reasonable fear or expectation, that companies are going to change the rules of the plan once they get under way?

DAN MENDELSON: Well, we are relying on these private companies to offer benefits, and they will change them over time. They'll change the formularies. They'll change their approach to how they're doing things. But I think those changes are going to be measured.

And in point of fact, the premiums that are being offered nationally are much lower than anybody expected them to be, and that's something that might actually bring premiums down in subsequent years, to an extent, so I would expect to see some measure of change, but I don't expect anything precipitous over the next couple of years.

RAY SUAREZ: Now, there is what's sometimes called the hole in the donut where your coverage runs out. You have to pay for all your own drugs, and then it kicks in again. Is there a predictable glide path? Is there a certain number of years that it's promised that that hole won't get bigger, that people won't be on the hook for more expenses?

DAN MENDELSON: No, in fact, it goes up every -- the coverage gap grows every year, because the break points are indexed so that every year that coverage gap is just going to grow and grow.

RAY SUAREZ: Is that going to be a problem?

RON POLLACK: Oh, I think it's a big problem already and it's going to get worse with each passing year. Just so your viewers understand, after you've spent $2,250 in drug expenditures, and you've gotten some help with that, all of a sudden you get no help whatsoever. Until you have made $5,100 in drug expenditures, there's a gap of $2,850.

Mind you, you have to pay as a senior 100 percent of the costs. And while you're doing that, you continue to pay the monthly premium.

RAY SUAREZ: And very quickly, Ron, how long until that, the size of that hole can change?

RON POLLACK: Oh, it's going to change each year, and it's projected in seven years to go to $5,100.

RAY SUAREZ: Ron Pollack, Dan Mendelson, thank you both.

RON POLLACK: Thank you.