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Medicare Participants Face Changing Drug Plans

December 5, 2006 at 6:35 PM EDT
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MEDICARE COUNSELOR: There’s a monthly premium of $47, which is a little bit higher than the one that you have now.

SUSAN DENTZER, NewsHour Health Correspondent: Last spring, senior citizen Taffy Davis met with a counselor at the Medicare Rights Center in New York to get help finding a new Medicare drug plan.

MEDICARE RIGHTS CENTER COUNSELOR: But the total cost for the whole year is…

TAFFY DAVIS, Medicare Enrollee: It’s far lower.

SUSAN DENTZER: Davis, who suffers from chronic lung disease, also takes a brand-name drug to fight depression, so she was thrilled to find a Medicare plan that would cover her costly drug straight through the notorious donut hole, or coverage gap.

In 2007, that gap will begin once beneficiaries’ total drug costs reach $2,400 and last until they’ve paid $3,850 out of pocket. Now, six months later, Davis is shopping around again, a result of changes her current plan made for its coverage next year.

TAFFY DAVIS: They raised the monthly premium almost double, and then they would only cover medication in the donut that was generic. If you took a brand name, you were out of luck.

SUSAN DENTZER: For Davis and 38 million other Medicare beneficiaries who’ve signed up for drug coverage, it’s open enrollment season once again. As this so-called Part D of Medicare approaches its first birthday in January, it’s in many respects a whole new program for many.

Robert Laszewski is a consultant and former insurance industry executive.

ROBERT LASZEWSKI, Health Policy and Strategy Associates: Now we’ve got the first renewal; we’ve got the first chance for seniors to take a look at other options, for seniors who didn’t sign up to sign up. And there’s a little bit of trauma for a few people because some of these plans have changed materially, and some seniors are going to have to go back and take another look.

SUSAN DENTZER: Some of the 2007 changes enrollees confront are mandated by law, like the fact that up-front deductibles will rise from $250 in 2006 to $265 in 2007. Others stem from rising drug prices and utilization, which have helped to boost the premiums on the most popular drug plans by 7 percent to 10 percent.

PHONE OPERATOR: Thank you for calling the AARP Medicare Rx Plan.

Changes in 2007 Medicare plans

Robert Laszewski
Consultant
The most generous plans have been taken up by the people who use the most prescription drugs. And the profit and loss situation has been a little bleak on those plans, and many of them are now being withdrawn.

SUSAN DENTZER: Still other changes flow from the fact that the private companies sponsoring the drug plans have altered their product offerings. For example, for 2007, there are 1,875 prescription drug plans available nationwide, a sharp 30 percent increase over the plans available this year.

Beneficiaries in every state now have at least 46 plans to choose from. And in states like New York, Pennsylvania, Ohio and West Virginia, they've got 61 or more.

To Health and Human Services Secretary Michael Leavitt, this proliferation of plans signals the success of delivering government-subsidized drug coverage through the private health insurance market.

MIKE LEAVITT, Health and Human Services Secretary: One of the things that a market does, an efficient market, is that, when there is a desire on the part of consumers, they march to it and find it, and the market responds. We learned this year, for example, that people value lower-cost plans. And what you see is that the market has now responded, and there are more of all of those types of plans.

SUSAN DENTZER: Lois Quam heads Ovations, the UnitedHealth Group division that has signed up the most Medicare beneficiaries, nearly six million, in its prescription drug plans. She agrees that many plans have been added this year specifically to address consumers' needs.

LOIS QUAM, CEO, Ovations: We've offered a new plan that provides coverage in the donut hole with generic drugs only. And we hope that will be helpful for people for whom that kind of coverage is very important.

Secondly, we've also offered a saver plan that's a lower-cost plan. Our plans last year had premiums in the $23-to-$30 range. This year, in some regions, we'll have plans as low as $9.80.

SUSAN DENTZER: But consultant Laszewski says other changes stem from the fact that a few insurers have acted to head off large losses from the Part D program. Take plans like the one Taffy Davis got this year, which offered broad coverage for brand-name drugs, even when beneficiaries entered the donut hole.

ROBERT LASZEWSKI: The most generous plans have been taken up by the people who use the most prescription drugs. And the profit and loss situation has been a little bleak on those plans, and many of them are now being withdrawn.

SUSAN DENTZER: So in 2007, in 11 states, including New York where Davis lives, there will be no plans that will pay for brand-name drugs in that coverage gap. In those states, plans offering coverage in the donut hole will pay for generic drugs only.

That's one option Taffy Davis is eyeing as she trolls the Medicare.gov Web site.

TAFFY DAVIS: You know, I have no choice, so whatever it is, it will be. And my husband will get a smaller allowance.

SUSAN DENTZER: As for her brand-name drug, Tofranil, she figures that, when she hits the coverage gap, she can buy it over the Internet from Canada at substantial savings from the U.S. retail price. But doing so is technically illegal, and that's one reason Davis is interested in another new twist in 2007: the Democratic majority that will take the reins of Congress in January.

Democrats suggest reforms

Rep. Pete Stark
D-Calif.
We should try and change this Part D program to make it a decent plan, absolutely one without a donut hole. It's a plan that would be traditionally enjoyed by members of unions or members of management in large companies.

POLITICIAN: Let's talk about Medicare.

SUSAN DENTZER: Throughout the recent election campaigns, Democrats criticized the Part D program and vowed sweeping changes if they took control. Now, California Congressman Pete Stark, who'll head a House Ways and Means health panel, will be among those crafting proposed changes.

High on his list, Stark says, is revamping the drug coverage to banish the donut hole once and for all.

REP. PETE STARK (D), California: We should try and change this Part D program to make it a decent plan, absolutely one without a donut hole. It's a plan that would be traditionally enjoyed by members of unions or members of management in large companies.

SUSAN DENTZER: The nonpartisan Congressional Budget Office has estimated that eliminating the donut hole for enrollees like Davis would cost tens of billions of dollars, but Stark says those costs would not be excessive if Democrats make another change from current law.

That would allow the government to negotiate drug prices with pharmaceutical companies, just as it now sets the prices paid by Medicare for everything from hospital stays to doctors' fees. Stark says his preferred option for doing that is to create a government-sponsored Medicare drug plan that would compete against private plans and negotiate drug prices just as they do.

REP. PETE STARK: There'd still be the option to go and join United, or Humana, or whomever else you chose, but this would be a fallback position. I do think that providing a benefit that's run by the government, without prejudicing the private plans that are there now, is possible. Whether the president would veto it or not, I don't know.

SUSAN DENTZER: Stark says other options could be requiring the government to negotiate a price ceiling on all drugs offered through Medicare plans. Alternatively, Congress could simply repeal the prohibition in current law to the government negotiating drug prices, then stand back to see what happens.

Speaking for the Bush administration, Secretary Leavitt says all of those are bad ideas.

MIKE LEAVITT: It really boils down to one basic philosophic question: Is it better for the government to run health care, or is it better for consumers to be able to make decisions for themselves?

The only way to negotiate prices, for example, on prescription drugs is to say, "If you don't lower your price, I'm going to take your pill off the plan." Now, once government begins to make that decision, it's the government deciding which pill is going to be taken off the plan.

SUSAN DENTZER: That's just one of several Medicare topics that the Bush administration and congressional Democrats are likely to fight over in the months ahead. Many Democrats want to eliminate special subsidies backed by the administration to insurers that offer broad HMO-type Medicare coverage.

Others want to help people whose drug expenses place them in the donut hole by eliminating the current prohibition on importing drugs from countries like Canada.

'Do your research' for better plans

Rochelle Kremins
Medicare participant
Do your research. Even if you're very happy with your plan, if it covers all your drugs, there could be a cheaper plan out there.

SUSAN DENTZER: But any changes like that would have to make it through a contentious political process and are clearly well down the line. For now, Medicare enrollees are simply looking for the best arrangements for next year.

SARAH HEWES, Medicare Rights Center: This prescription is the one that was dropped, right?

ROCHELLE KREMINS, Medicare Enrollee: That was dropped, right.

SARAH HEWES: OK.

SUSAN DENTZER: Back at the Medicare Rights Center, counselor Sarah Hewes recently helped 67-year-old Rochelle Kremins search for a new drug plan after her current plan dropped one of her heart medications for 2007.

Using Medicare's plan finder tool, Hewes found Kremins another plan that would cover the drug, and at a big savings, to boot.

SARAH HEWES: So you can see your total monthly cost here, instead of being around $148 with one drug not covered, it's going to be more around $35 to $50, which is a great savings.

ROCHELLE KREMINS: Right.

SARAH HEWES: That's a pretty good reduced price.

SUSAN DENTZER: Kremins told us the moral of her story was clear.

ROCHELLE KREMINS: Do your research. Even if you're very happy with your plan, if it covers all your drugs, there could be a cheaper plan out there.

MEDICARE COUNSELOR: Does he take a lot of prescription drugs?

SUSAN DENTZER: Medicare counselors say most people would do well to heed that advice, given the many changes in plans for next year. And to avoid last-minute glitches that could prevent prescriptions from being filled in January, beneficiaries are being advised to make their choices by December 8th.