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SUSAN DENTZER: Why is Medicare, this year of all years, proving to be so controversial?
PATRICIA NEWMAN: Well, Medicare’s always a big issue and it’s a big issue because it’s important to seniors and seniors of course are a big voting bloc and they vote. It’s particularly important this year because Congress and the administration just passed their Medicare drug law and seniors have heard a lot about what the government’s going to do to help them with their drug costs.
SUSAN DENTZER: Kaiser has done some polling showing that people have a lot of ambivalence about the Medicare law. What do, what do people say in response to the polls when they’re asked, What’s your opinion of the expansion of Medicare that took place last year?
PATRICIA NEWMAN: Seniors are more negative than positive about the new drug law and when we ask those who are negative why, the main reasons they say are one, they don’t think the law goes far enough in helping seniors with their drug costs, and two, they think it’s simply too complicated. In many respects it’s too early, and this is 2004. The new drug benefit doesn’t go into effect until two–2006. But seniors are worried because they’re paying a lot out of pocket for their prescription drugs and they want to know how they’re going to be helped.
SUSAN DENTZER: What else about the new law is making people confused?
PATRICIA NEWMAN: Well, there’s a lot to absorb about the new law. There is an interim discount card program that was put into effect but that discount card program only lasts this year and next year. At the end of 2005, it goes away. So what’s especially confusing is seniors are being asked to learn about the discount card program and then they have to forget everything they’ve learned when the new drug benefit goes into effect in 2006. And that’s a tall order.
SUSAN DENTZER: And then to top it off, they also know that many of them are going to be faced with the, in some cases necessity, in some cases just the encouragement to join these new Medicare Advantage plans. Let’s talk about those.
What about the new options that Medicare beneficiaries are going to face?
PATRICIA NEWMAN: Well, everything will be new beginning in 2006. As seniors can today, they can choose between traditional, fee-for-service Medicare, or managed care plans which are sometimes called Medicare Advantage plans, or HMOs.
If they choose the same traditional Medicare, they have to find new drug plans, these are private plans that cover only the portion of Medicare that will be paying for prescription drugs. This is an entirely new insurance product and a very new thing for seniors to have to do.
So that is a whole new process that will be put in place when the new drug benefit goes into effect. Those who are comfortable with managed care plans, like Medicare HMOs, may choose to go into a Medicare HMO to get their drug benefits but that means they have to live in an area where such a plan’s available.
PATRICIA NEWMAN: The law has changed and seniors know that the new benefit is coming their way, but they’re more negative than positive about the new law and the main reason, they say, is that they think the benefit won’t go far enough in helping seniors with their drug costs, and they’re worried it’s too complicated.
SUSAN DENTZER: Another issue that candidates are fighting about is the projected premium increase, now, for 2005 in the Part B premium.
First of all, let’s explain what Part B is and what this premium pays for. And then we’ll talk about why the premium is going up so much this year.
So what, what exactly is the Part B premium paying for?
PATRICIA NEWMAN: The Part B premium pays for the part of Medicare that pays for physician and most outpatient services. The premium is the monthly amount that people on Medicare pay, it’s their share, and they pay 25 percent of total costs under this part of Medicare.
This premium pays for the part of Medicare that pays for physician services and other outpatient services. Beneficiaries pay 25 percent of the cost for this part of program, and this 25 percent part of the, portion of the cost is a formula that’s been set into law since 1983. Beneficiaries have been paying 25 percent of costs, about that amount, since then.
SUSAN DENTZER: And why, then, are premiums projected to go up 17 percent from this year to next year?
PATRICIA NEWMAN: The main reason that premiums are going to go up by 17 percent is that the law was changed.
The law was changed to increase payments to physicians because of concerns about underpayments and also increased payments to health plans.
When the, when change is made that increases payments under this part of Medicare, for every dollar of increase in spending beneficiaries pay 25 percent or 25 cents on the dollar.
SUSAN DENTZER: So in effect it was, all of this was driven by the changes that were made in the law last year?
PATRICIA NEWMAN: Most of it was–most of this increase was driven by changes that were made in the law last year. And I say “most” because a portion of it is the reserve.
SUSAN DENTZER: So information has now come out about the long-term growth of out-of-pocket spending in Medicare. What does that data show?
PATRICIA NEWMAN: These new numbers show what Medicare beneficiaries are projected to pay in their Medicare premiums, deductibles and cost-sharing as a share of their total Social Security checks, and what they show is that a typical 65-year-old can expect to, to pay about a third of her Social Security check for Medicare cost-sharing requirements in 2006, and almost half of her Social Security check in these payments in 2020.
SUSAN DENTZER: So the growth is going to be substantial.
PATRICIA NEWMAN: The growth in out of pocket–the growth in health care costs is a real issue. It’s substantial for the Medicare population as it is for the non-elderly population and it’s a real concern.
SUSAN DENTZER: And what about, say, the average 85-year-old? What–how are those costs going to go up?
PATRICIA NEWMAN: In 2006, an average 85-year-old would pay more than 40 percent of her Social Security check for Medicare cost-sharing requirements and by 2020, that number rises to almost 60 percent.
SUSAN DENTZER: And we’ve known for a long time that Medicare is a costly program and getting more costly. So why should any of this surprise us?
PATRICIA NEWMAN: I don’t think this is, is so surprising. Health care costs are rising, many seniors are living on their Secret Service income which is fixed, and income is not rising as fast as health care costs. So unless something is done to control the growth in health care costs, including prescription drugs, then seniors will be paying a growing share of their limited incomes for their health care.
SUSAN DENTZER: Seventeen percent is a big number.
PATRICIA NEWMAN: To put this in context, federal workers and their families will see an increase of 8 percent for their health insurance premiums. So this Medicare premium increase is roughly double that amount.