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Medicare drug ad deluge expected to swamp seniors
When information about Medicare's new prescription drug benefit comes out next weekend, Illinois seniors will be bombarded with ads from as many as 16 private insurance companies vying for their business.
The first look at how large, and potentially confusing, the range of choices will be came Friday when the Centers for Medicare & Medicaid Services released a list of health plans approved to administer the drug benefit that becomes part of Medicare on Jan. 1.
More companies than expected lined up to get a piece of the billions in play in the largest expansion of the federal health insurance program for the elderly and disabled since it was created 40 years ago.
Details about specific plans and costs will begin to become available Oct. 1, the day plans are allowed to begin advertising and marketing themselves.
Residents in all states will have at least 11 plans to choose from, while those in bigger states such as Texas and California will have 20 choices or more. And the options become even more numerous if beneficiaries opt to get their drug coverage through Medicare Advantage Plans, which operate like a health maintenance organization and offer more comprehensive coverage than just a drug benefit.
Federal officials praised the abundance of choices and credited it with lowering prices. Others, including the state's largest insurance company, said they expect Illinois seniors will be overwhelmed when marketing begins next weekend.
"In October the gun goes off and everybody can talk about their plans," said Peter Rodes, vice president of consumer markets for Blue Cross and Blue Shield of Illinois. "You are just unleashing a torrent of information at people all at the same time. How can anything but chaos reign?"
Beginning Oct. 1 seniors are expected to be bombarded by a chorus of overlapping messages in TV commercials, radio advertisements and direct mail pieces that will last through the Nov. 15 enrollment period.
The 16 private plans participating in Illinois include household names like Cigna Corp., UnitedHealth Group, Humana Inc. and Blue Cross and Blue Shield of Illinois. Large drug benefit firms Caremark Rx Inc. and Medco Health Solutions Inc. are also participating.
The Bush administration deflected criticism that too many choices was a bad thing, saying the competition has driven down monthly premiums to 14 percent less than original projections. Most seniors will have a choice of one plan with a monthly premium lower than $20.
"The competition between these organizations has resulted in lower costs than expected," said Dr. Mark McClellan, administrator for the Centers for Medicare & Medicaid Services.
In the Medicare drug program the government subsidizes some of the costs for drugs while customers pay the rest through premiums and co-pays. Private insurers will largely administer the benefits--not the federal government, which is expected to spend about $720 billion on its portion of it during the next 10 years.
Companies are spending unprecedented amounts on advertising and marketing to launch their benefits and even they are worried that so many messages coming from so many plans will cause confusion.
Humana said it will spend about $80 million on infrastructure, marketing and advertising to ramp up for the launch of its Medicare drug benefit offerings.
Medicare officials say they will be stepping up their educational efforts at the same time, and have already assisted in deploying 140 networks of community groups, ranging from businesses and pharmacies to non-profit organizations, to help seniors in their neighborhoods.
McClellan said government officials would be making all-out efforts to reach seniors with educational materials "where they live and work and play and pray."
They are also urging seniors to call 1-800-MEDICARE if they have questions.
"We want to make sure people get the support that they need," McClellan said.
Still, the expected bombardment of marketing materials and advertisements is a scary proposition, some seniors say.
"We are going to be inundated with this," said Evelyn Conti, a 78-year-old grandmother from Park Forest.
Already, many seniors have been attending meetings, including some organized by health plans that, until Oct. 1, can only talk about how the program will operate and provide basic education. They cannot officially market plan specifics such as prices and details on what drugs will be covered.
"They are whipping the seniors with letters and information," Conti said. "They have been having all of these meetings locally and the local organizations are trying to explain things, but there are still a lot of seniors that don't understand it."
Some Wall Street observers and politicians are beginning to worry that the large number of plans could backfire if health plans do not get enough participants.
In any health insurance program, firms have to spread payments from the government over a group of people, pay for their benefits and still have enough money left over to turn a profit.
It is unclear whether there will be enough participants in each plan to achieve that goal.
The government's effort in the late 1990s to encourage seniors to enroll in HMOs resulted in scores of plans dropping out of the Medicare program when they found they did not have enough enrollees and that government payments were insufficient.
"The Medicare prescription drug program could be a rerun of Medicare HMOs, with companies pulling out when they can't make enough profits, leaving millions of Americans stranded," said Rep. Jan Schakowsky (D-Ill.). "They may also enroll in plans that drop out of the market after a year or two, leaving beneficiaries with nothing but a glossy brochure."
McClellan said proposals by participating insurers were reviewed by independent actuaries to ensure they had viable business plans.
And, he said, seniors who do not like their health plan can switch to another plan in a year. He expects many will do so because competition will prompt plans "to offer better benefits" over time.