TOPICS > Health

New Medicare Prescription Plan

November 11, 2005 at 12:00 AM EDT


SUSAN DENTZER: Cezreada Lacy has one word to describe how she feels about Medicare’s coming prescription drug coverage.

CEZREADA LACY: Confused. That sums the whole thing up.

SUSAN DENTZER: At a recent AARP conference in Charleston, WV, Lacy told us she is grateful for the new coverage, which will clearly save her money. Lacy now spends nearly $5,000 a year on medication to treat ailments like lung disease.

CEZREADA LACY: I’m really looking forward to it, being able to cut back on what I’m spending for medicine. And maybe I can have some money to do something else.

SUSAN DENTZER: But picking a plan will not be easy. Lacy and 43 million other Medicare enrollees now face a choice of dozens of private insurance plans covering prescription drugs. The plans offer equivalent coverage, but with varying deductibles and co-payments and even different lists of authorized drugs.

The number of plans beneficiaries can choose among also varies from state to state. Alaska, for example, has 27 plans offering coverage just for drugs, plus another six HMO’s for other plans offering comprehensive coverage, including medication.

West Virginia has the most of any– a stunning 52 drug-only plans, plus 12 HMO’s and other comprehensive arrangements.

To help seniors like Lacy, and to promote awareness about the benefits, a special Medicare bus has been touring the country.

On this day, Mark McClellan, a physician and economist who oversees Medicare, was onboard. Speaking to the Charleston AARP Forum, he offered calming words.

MARK McCLELLAN: This is the most important new benefit in Medicare in 40 years, and that means it is a big change. Right now what we’re seeing is that the coverage is going to be available, it costs less and it offers better benefits than many people had expected.

SUSAN DENTZER: McClellan and other government officials say the abundance of plans stems from vigorous competition in the private sector. That’s what many in Congress envisioned when they enacted Medicare reform in 2003.

Under that law, new prescription drug coverage was to be offered by competing private insurance plans, with the government paying three-fourths of the cost and Medicare enrollees paying the rest. At the time, even some in the insurance industry predicted that the new system would not work.

One of the doubters was Robert Laszewski, a consultant and veteran insurance executive.

ROBERT LASZEWSKI: Lots of people in the insurance industry, including me, said the insurance companies would not show up to provide these plans. In fact, what’s happened is far more insurance companies than we expected would show up. Instead of having no one in the market, in effect we’ve got the other extreme, we’ve sort of got the market run amok.

MAN: I need Benicar.

SUSAN DENTZER: And the market running amok turns out to be the classic good news/bad news story for consumers.

McClellan told the seniors in Charleston there was good news about the coverage gap known as the “donut hole.” That’s the odd feature of the benefit Congress originally designed. It does not cover enrollees’ drug costs between $2,250 and $5,100.

Some drug plans are offering to cover — or at least partly cover — drug expenses that fall into that gap.

Later, onboard the Medicare bus, McClellan told us another piece of good news: Because of the competition, many West Virginia enrollees would pay far less in average monthly premiums for drug coverage than was originally predicted.

MARK McCLELLAN: You can get the basic Medicare benefit at a very inexpensive cost, under $10 or $20 a month if that’s what you want, or you can choose more comprehensive coverage. Even the most costly plans here in West Virginia are in the range of $50 to $60 a month or so for very comprehensive coverage.

SUSAN DENTZER: One reason these premiums are so low, McClellan said, is that insurers have driven tough bargains with pharmaceutical companies on bulk purchases of drugs. That also defies earlier predictions that this would not happen.

Then there’s the bad news: Having to sift through lots of choices to pick the best plan. And it’s not just beneficiaries who are worried. So are pharmacists, like Jerry Leonard of Drug Emporium West Virginia.

JERRY LEONARD: We realized early on that we were going to be the person that was most likely to be looked upon as an individual that’s going to be knowledgeable about the program.

But with people already coming into our pharmacies with questions about the plans, the plan design, “which is best for me? “Are my drugs going to be covered?” — we have at this point in time absolutely no answers for them.

SUSAN DENTZER: Leonard offered an example.

JERRY LEONARD: Let’s take for instance an ace-inhibitor which many seniors take for their blood pressure. Between generic and brand ace- inhibitors, there are probably as many as 20 or 30 drugs on the market within that category.

If only two are covered on a particular plan, then the seniors’ faced with a choice of either picking a plan that covers the drug that they’re already on, or picking a plan that best meets their needs overall but is going to require them to change medications in order to get their drug covered. You know, again, that is a fairly daunting challenge.

SUSAN DENTZER: And a challenge that some West Virginians told us they just were not up to. Consider Marvin and Marie Galford, who take roughly 20 drugs between them for conditions ranging from heart trouble to kidney disease.

MARVIN GALFORD: There’s just so many options that I don’t know, what they are and how it’s going to help us, and when they start and when they don’t. It’s just too much, mind-boggling.

SUSAN DENTZER: But at the AARP Forum, McClellan told them their decision really was an easy one, since the couple already had so- called retiree drug coverage through Marvin Galford’s former employer.

WOMAN: Do I understand that we stay like we are now?

MARK McCLELLAN: The answer is, if it’s good coverage, meaning that they pay a lot of your costs, they give you a good benefit and your employer or union pays for it, that program can get subsidies from Medicare.

On average, Medicare is going to be paying about $700 or $800 per year for these good retiree plans. And in most cases, you can just stay right where you are and get new help from Medicare through the plan that you have now.

SUSAN DENTZER: Other seniors told us they were confused about exactly who was eligible for the new drug benefits. We asked that of Linda Calvert, who heads West Virginia’s State Health Insurance Assistance Program.

LINDA CALVERT: Everyone with Medicare is eligible for this prescription drug coverage. Some people are thinking that if they don’t meet certain income guidelines, that they aren’t eligible for the coverage.

SUSAN DENTZER: But she says there’s a program called Extra Help for enrollees with limited means.

LINDA CALVERT: They will have no premium. They will have no deductible. So they will be able to go to the pharmacy, get their prescriptions filled for as little as maybe $2 for a generic and $5 for a brand. So it will benefit a lot of people in West Virginia.

SUSAN DENTZER: Along with carrots like Extra Help, though, there are also sticks in the new drug coverage. One is a financial penalty that current Medicare enrollees may have to pay if they do not sign up in the next six months.

MARK McCLELLAN: The next chance to enroll will be at the end of 2006, and the penalty is 1 percent per month of the average premium in the drug benefit. So that means if you don’t sign up by May 15, next chance you get to enroll you’ll be paying 6 percent more from there on for the cost of your drug coverage.

It’s just like other kinds of insurance. If you were thinking about buying homeowners’ insurance, you probably don’t want to wait until your house is on fire. The coverage is going to cost a lot more then.

SUSAN DENTZER: There are plenty of signs that beneficiaries are still confused. A new Kaiser Family Foundation survey suggests that just one in five of Medicare’s 43 million enrollees say they’ll sign up for coverage.

But experts like Lasziewski, who fully appreciate the challenges for enrollees, think more of them should sign up.

ROBERT LASZEWSKI: We can get so caught up in the details and as a result throw our hands up and walk away, when in fact getting a good plan, it may not be the best plan you could get. But if the alternative is not getting this coverage, I think you’re foolish because you can’t buy a bad plan.

SUSAN DENTZER: That should be comforting advice to many on Medicare, happy to have some help at last in paying for prescription drugs.