Editor’s Note: Journalist Philip Moeller, who writes widely on health and retirement, is here to provide the Medicare answers you need in “Ask Phil, the Medicare Maven.” Send your questions to Phil.
Moeller is a research fellow at the Center on Aging & Work at Boston College and co-author of “How to Live to 100.” He wrote his latest book, “How to Get What’s Yours: The Secrets to Maxing Out Your Social Security,” with Making Sen$e’s Paul Solman and Larry Kotlikoff. He is now working on a companion book about Medicare. Follow him on Twitter @PhilMoeller or e-mail him at email@example.com.
Your Medicare Questions
Medicare rules and private insurance plans can affect people differently depending on where they live. To make sure the answers here are as accurate as possible, Phil is working with the State Health Insurance Assistance Program (SHIP). It is funded by the government but is otherwise independent and trains volunteers to provide consumer Medicare counseling in state and local offices around the country. The nonprofit Medicare Rights Center (MRC) is also providing ongoing help.
Constance: My husband was recently prescribed Januvia [for type 2 diabetes] by his doctor. When he asked about the high cost of this drug, the doctor gave him a coupon from the drug manufacturer and said it would allow him to only have to pay $5 per month for it for up to 12 months. When we contacted our pharmacy, they said such coupons are not valid for those on any government insurance such as Medicare Part D. Further, because it is not on our formulary for the plan we are on, our insurance would approve it only with an elaborate petition, which only would result in our having to pay the entire cost of the drug anyway. What good is it to have the insurance approval if you wind up paying the full amount? Not only that, but by paying the full amount, it pushes you into the donut hole faster. Once you’re in the coverage gap, it brings up the costs of the other drugs you may be on. Even our doctor did not grasp this issue.
As it turns out, my husband’s high blood sugar was more the result of a recent surgery and he was able to reduce his blood sugar with just metformin [another type 2 diabetes drug] as he recuperated. But it seems to me that doctors are anxious to prescribe these high-cost drugs without understanding the fundamentals of Medicare plans. When a patient contests the matter, the doctor finally finds an “alternative” treatment that may be far less costly. I love our doctor, but this isn’t the first time he’s prescribed prohibitively costly drugs for one or both of us. Before we went on Medicare, we used to just take it, but that was when we had a manageable copay from our employer’s insurance. Now, it’s a different story. Why are doctors unwittingly complicit in this?
Phil Moeller: Where to begin? How doctors prescribe meds and the Medicare rules under which we pay for them have so, so many problems. Her doc should do better but he is floating in a Big Pharma sea with few lifeboats in sight. First, let me extend my sympathies to Constance and her husband. Their experiences are, unfortunately, increasingly common in the world of wonderful drugs that carry obscene sticker prices. While Constance levels her guns at her doctor, let’s not forget that it’s the drug companies who have been the manipulative puppet masters here. Medicare Part D drug plans first hit the market in 2006. Since then, we have paid an enormous price for the pharmaceutical industry’s success in getting Congress to ban Medicare from negotiating the prices of drugs provided to beneficiaries.
The way Part D repayment rules are set, the government has become the deep-pocketed payer of most of these pricey drugs. Now, consumers such as Constance have good reason to squawk over how much they must pay. But there is a $4,700 ceiling in 2015 on consumers’ out-of-pocket expenses in Part D plans. It doesn’t take much to hit that ceiling when we’re talking about the recent generation of expensive drugs. When that happens, Medicare pays nearly all of the bill for drugs in this so-called “catastrophic” tier of insurance coverage.
Creating coupon programs for people with commercial insurance who have not yet signed up for Medicare may sound like a reasonable approach from the pharmaceutical industry. Pardon me for not seeing it this way.
The pharmaceutical industry has been playing the tune for years that it needs to charge high prices to justify all the research and development work required to keep finding all the wonderful drugs that help improve and extend our lives. We’ll debate another day why U.S. consumers are pretty much the only ones in the world who must listen to this song. I love people in other countries, really I do. But, as many readers have asked me, why can someone in Europe or Asia pay a fraction of what Americans pay, while U.S. consumers largely end up footing the bill for the pharmaceutical industry’s research and development expenses?
But just looking at domestic pricing, how can the couponing programs for Januvia and other drugs be justified? I would challenge drug companies to explain. How they can afford such largesse if they indeed need all these drug revenues for their research and development programs?
Call me cynical, but it seems to me that these coupon programs achieve two business goals. First, they shield commercial insurers from the full brunt of covering expensive drugs. Second, they provide consumers with artificially low prices that encourage the early adoption of these drugs and, as in Constance’s case, induce well-intentioned doctors to prescribe them.
Later on, when it’s Uncle Sam on the hook (and this still means us taxpayers in the long haul) the coupons go “poof,” the effective prices soar, and a silent and incredibly effective raid on the U.S. Treasury can commence. I suspect that even the costs of the couponing programs are embedded in a price structure that clearly is built with the “anything goes” Medicare market in mind. This is just wrong. And if this is the kind of “free enterprise” that members of Congress were supporting when they passed the Part D legislation, then raspberries to them, too.
As for Constance’s doctor, let’s take a step back and keep in mind what we really need our doctors to be doing. They went to medical school to learn how to diagnose, treat and heal us. They didn’t become doctors so they could master drug formularies or the intricacies of drug coupon programs.
I share Constance’s lament that doctors are not more sensitive to the economic implications of their treatment decisions. In this regard, the world has changed faster than doctors have adjusted. Consumers are on the hook for paying bigger and bigger shares of their medical expenses.
Borrowing a page from the retirement pension industry, we are moving from an era of defined benefit health insurance to defined contribution health insurance. The price monkey has been shifted onto our backs (directly as consumers and indirectly as taxpayers), and our physicians should be more sensitive to this shift.
Fortunately, there are increasingly powerful medication software and medical case-management programs that Constance’s doctor should make sure his office staff is using. Yes, absorbing these office expenses is yet another reason why doctors face financial pressures in serving a Medicare population. But they ought to do this.
And before I get crocodile-tears-stained emails from doctors, let me just remind them that Congress just agreed to shell out $210 billion—mostly at taxpayer expense—to eliminate the perennial “doc fix” headache that had been plaguing physicians for nearly 20 years.