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The true test of Medicare's new program to pay for prescription drugs begins this week, as drug plans start marketing to consumers and seniors start evaluating their product offerings.
For the first time, seniors will get specific answers to basic questions such as, "Will my medications be covered?" "Can I buy them at my local pharmacy?" and "What will it cost?"
The success of this vast new government program hinges on consumers' response. If seniors decide that drug plans will save them money and provide valuable insurance protection, enrollment could soar as high as 30 million people, some analysts estimate. If people decide the plans are too expensive or limited in their coverage, results could be disappointing.
Some 42 million people get health care through Medicare, including 36 million seniors and 6 million people with disabilities, but most medications haven't been covered until now. Instead, seniors have typically paid for drugs on their own, while a minority have had drug coverage through retiree health plans, supplemental insurance or other government sources.
The drug program is one of the Bush administration's most important domestic policy initiatives, and the cost is enormous--an estimated $720 billion over the next 10 years.
It's also an extraordinary shift in how Medicare operates. For the first time, a new benefit will be paid for by the government but administered entirely by private companies such as Cigna Corp., Humana Inc. and UnitedHealth Group. Earlier this year, an analysis by JP Morgan Chase & Co. found 10 large insurers were spending nearly $350 million in 2005 to "prepare for new Medicare opportunities."
In Illinois, as many as 16 private companies are expected to release a torrent of sales pitches aimed at 1.6 million Medicare members in the coming weeks and months through the mail, over the phone and through television, radio and print ads.
A lot to figure out
"It's going to take a big effort to try to figure this out," said Mary Dalton, 64, a Tinley Park resident who joined Medicare two years ago after a severe stroke. Dalton takes six prescription drugs for diabetes, high cholesterol, high blood pressure and osteoporosis and thinks she'll save money if she signs up with a Medicare drug plan. But she is frustrated by the program's complexity.
Standing ready to help are scores of community groups and state and federal agencies that have trained thousands of volunteers to help people understand the Medicare benefit. The state of Illinois is sponsoring 131 community events over the next two months; that's only part of the assistance being mobilized.
Enrollment in plans starts Nov. 15 and lasts through May 15. Coverage begins in January or the month following enrollment, whichever is later. Most consumers who sign up after this initial enrollment period will pay a penalty of 1 percent of the plan's premium for every month they waited.
There are notable exceptions. In Illinois, more than 218,000 residents qualify for both Medicaid and Medicare because they're old, disabled, sick and impoverished. This vulnerable group will need to sign up for a Medicare drug plan by the end of this year, because their Medicaid drug coverage ends on Jan. 1.
Also in Illinois, about 230,000 residents belong to Senior Care and Circuit Breaker, two state pharmaceutical assistance programs. Those programs are being changed to coordinate with Medicare drug plans, and members will have to sign up with one of two plans by year's end to qualify.
In general, the government's hope is that competition among Medicare drug plans will drive down costs and expand choices for consumers.
Indeed, choices will be plentiful. More insurers are offering drug plans than originally expected, and most will be marketing more than one variety. Plans will vary depending on the monthly premium charged, the drugs covered, the pharmacies where consumers can purchase medications, and other factors. Blue Cross and Blue Shield of Illinois, for instance, intends to sell plans with premiums ranging from $27 a month to $45 a month, said Peter Rodes, vice president of consumer markets.
Consumers trying to decide should ask themselves, "What is most important to me--the cost, the coverage or the convenience?" and evaluate plans on these criteria, said Kathleen Harrington, who directs Medicare's office of external affairs.
Complicating matters, there will be standard drug plans and non-standard plans. The Medicare drug benefit's standard structure calls for consumers to pay a $250 deductible before the government starts paying for drugs. From $250 to $2,250, consumers will pay 25 percent of drug expenses, up to $500. Between $2,250 and $5,100 there is a gap known as the "donut hole" and consumers are responsible for all of those bills, up to $2,850. After $5,100, a consumer will pay 5 percent of drug charges.
A key requirement for all plans is that they cover at least two drugs in each of more than 200 categories and the majority of drugs in six categories: anti-depressants, anti-psychotics, anti-convulsants, HIV/AIDS medications, anti-neoplastics and immunosuppressants.
Beyond that, there is considerable flexibility. Some plans intend to waive the deductible, others intend to fill in the coverage gap between $2,250 and $5,100, and many intend to pay different amounts depending on whether the drugs are brand name or generic.
Medicare Advantage plans, including health maintenance organizations that require consumers to use networks of doctors and hospitals, will also offer drug coverage while waiving many fees. Fourteen Medicare Advantage plans will be available in Illinois, government officials announced Friday.
Consumers' choices will vary depending on individual circumstances, experts say. Healthy seniors who take few drugs may find themselves drawn to plans with low premiums, or may decide to forgo signing up for a plan altogether. Chronically ill seniors taking multiple medications may want a somewhat more expensive plan that pays for a broader list of drugs.
"Every person's needs are going to be different," said Sinead Rice Madigan, director of Illinois' Senior Health Insurance Program, which runs a toll-free hot line.
Low-income consumers can be assured of a significant benefit if they sign up for a program known as Extra Help. Under this program, the government will pay for a drug plan's deductible and premium, and there will be no gaps in coverage or copayments. To qualify, an individual must have annual income of less than $14,355, and married couples must have income of less than $19,245.
In making decisions, getting unbiased advice will be important, since drug plans will have an interest in promoting their products, not providing objective analysis. Information about where to find assistance is available through local departments on aging, state senior health insurance counseling programs, Medicare and other sources.
The threat of fraud
Already con artists have begun preying on seniors, federal and state officials report. To protect against fraud, "never give out personal information such as your Social Security number, credit card number, bank account or mother's maiden name over the phone," said Terri Gendel of the Suburban Area Agency on Aging. Door-to-door sales pitches are illegal; company representatives can only visit a consumer's home if invited. Also, anyone asking for a check for a Medicare plan before Nov. 15 is doing so illegally.
Anyone suspicious of fraud can call the Senior Medicare Patrol at 800-699-9043.
Dr. Sydney Bild, 82, a retired physician who lives in Hyde Park, has decided to choose none of the options. He'll continue to buy six medications that help regulate his thyroid and control his cholesterol from Canadian Internet pharmacies, noting that the Medicare drug plans can change the medications they'll pay for with 60 days' notice.
"When you get people to understand this, that the benefit can change, they don't like it at all," said Bild, who has discussed the Medicare benefit with other seniors at several symposiums across Chicago.
Others, such as Bernard Miller, 77, of Evanston, are still sorting through the complexities.
Miller is a heavy prescription drug user, with bills of about $12,000 a year for medications that control his blood pressure, sleep apnea, high cholesterol and other conditions. He has a retiree health policy from a former employer that pays a substantial portion of those bills as well as other medical expenses. But the health plan, which also covers Miller's wife, is expensive, with premiums of about $550 a month.
This fall, companies sponsoring retiree health plans are supposed to contact all their Medicare members and let them know if their retiree drug coverage is as good as that offered through Medicare. Miller hasn't received a letter yet. But he figures it may be cheaper to drop the retiree plan, sign up for a Medicare drug plan and then buy a supplemental policy that pays charges Medicare doesn't cover, such as a hefty deductible for hospital admissions and copayments for doctors' visits.
The consequences of switching
"It's very important to get in touch with your retiree health plan administrator to find out what the consequences of switching to a Medicare drug plan might be," Gendel said. Some retiree plans may terminate policies when members switch. Consumers with Medicare supplemental policies that cover drugs will also want to evaluate how that insurance stacks up against the new Medicare drug plans.
In Illinois, significant changes are in store for two popular pharmaceutical assistance programs, Senior Care and Circuit Breaker. These plans have been restructured to fill in gaps in the new Medicare coverage, such as premiums, deductibles and the "donut hole." The state is spending more than $120 million a year on the restructured program, now called Illinois Cares Rx. "It's a very good deal," noted Barry Maram, who heads Illinois' Department of Healthcare and Family Services.
There is a catch. Some 230,000 residents who belong to Senior Care and Circuit Breaker will have to sign up with one of two Medicare drug plans in Illinois--UnitedHealth Group or PacifiCare Health Systems--to be eligible for Illinois Cares Rx. That's because those companies have agreed to work closely with the state to coordinate benefits, said Anne Marie Murphy, who heads Illinois' Medicaid program.
The effect on Medicaid
Many advocates are particularly concerned about consumers who qualify for both Medicaid and Medicare coverage, a group of 6.4 million Americans that is overwhelmingly poor and frail, with low levels of literacy and weak social supports. These consumers--many of them mentally ill, cognitively impaired, severely disabled or in nursing homes--may have trouble understanding how the new Medicare drug plans work, especially restrictions on medications and participating pharmacies.
"The poorest, sickest and oldest Americans face grave risk of losing their life-saving medications," and the consequences could be "catastrophic," warned Robert Hayes, president of the Medicare Rights Center.
Help from family members will be critical for this group. "My mom doesn't understand anymore, so I'm the one who's going to have to fill out all these applications," said Shirley Pulliam, whose mother, Thelma, 73, has lived with her since a serious stroke four years ago.
"You know, it's very confusing," Pulliam continued after attending a session on the new Medicare drug plans at Truman College last week. "But I'm just going to have to learn everything I can, because I don't want to be begging for her medicine."
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Medicare's new drug benefit
What it does: Provides coverage of prescription drugs.
Who is eligible: All of Medicare's 42 million members.
When it starts: For people who sign up by December, the benefit
begins Jan. 1. For those who join later, benefits begin the first day of the month after sign-up.
Initial enrollment: Consumers can sign up between Nov. 15, and
Penalty: Most people who don't sign up during this initial
enrollment period will pay a penalty of 1 percent of the plan's
premium for each month that enrollment is delayed.
Running the program: Unlike traditional Medicare, plans will be
administered by private companies such as Cigna Corp.,
UnitedHealth Group, Humana Inc. and Blue Cross and Blue Shield of Illinois.
Drugs covered: Each plan will have a list of drugs for which it will pay. All plans are required to cover at least two drugs in 209 categories.
Standard drug plan costs for consumers:
Avg. monthly premium: $32
Deductible: $250 (before any benefits are received)
Consumers pay: 25% cost of drugs up to $500
Consumers pay: 100% cost of drugs up to $2,850
Expenses: Above $5,100
Consumers pay: 5% of the cost
Financial assistance: People with low incomes will qualify for a
program known as Extra Help. To qualify, a single person must
have an annual income of less than $14,355 and a married
couple's income must be less than $19,245. Those who qualify are not responsible for paying premiums, deductibles or copayments.
Senior Care or Circuit Breaker: The state has created a new
program, Illinois Cares Rx, which wraps around the Medicare
benefit. Members have to sign up for a Medicare drug plan by
Dec. 31 to participate in Illinois Cares Rx.
- For Senior Care, consumers must have income of no more than $19,140 (single) or $25,660 (couple).
- For Circuit Breaker, consumers must have income of no more
than $21,218 (single) or $28,480 (couple); only 10 categories of
drugs are covered.
Retiree coverage: Employers will be sending out letters this fall
telling seniors if their retiree plans' drug benefits are at least as
good as Medicare's. To understand the full consequences of
making a switch to a Medicare drug plan, people should consult
the retiree health plan administrator.
Supplemental Medicare coverage: Seniors with Medigap
policies that cover drugs can retain these policies, but no new
policies will be sold. Seniors who want to switch to a Medicare
drug plan will want to analyze the impact on their supplemental
Medicaid and Medicare members: Some very poor people belong to both Medicaid and Medicare. They will be automatically assigned to a Medicare drug plan this fall unless they choose a plan on their own. The Medicare plans may put more restrictions on covered medications and pharmacies where drugs can be purchased. Medicaid drug coverage will lapse for this group, including 218,000 Illinois residents, at year's end. Medicaid will still cover these individuals for other health-care services, however.
Sources: Medicare, state of Illinois, Make Medicare Work Coalition Chicago Tribune
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Where to get help
Senior Health Insurance Program
Illinois Dept. on Aging HelpLine
Suburban Area Agency on Aging (Cook County suburbs)
Chicago Dept. on Aging (City of Chicago)
Northeastern Illinois Area Agency on Aging (collar counties)
Progress Center for Independent Living
For people with disabilities
Make Medicare Work Coalition
Illinois Dept. of Healthcare & Family Services
For people who qualify for both Medicaid and Medicare.
Social Security Administration
Administration on Aging
Access to Benefits Coalition
Sources: Medicare, Make Medicare Work Coalition, Suburban Area Agency on Aging, Illinois state agencies
Find Tribune stories on the 2006 Medicare drug benefit online at chicagotribune.com/ medicaredrugs