Caught in a tangle of fine print

When Marion and Joseph Young signed up for one of the new Medicare prescription drug plans, they did what government officials said everyone should do: Shop carefully. They found a plan with no premium and no deductible. Most important, they made sure it covered the critical medications needed for the struggle both are waging against multiple sclerosis.

To their consternation, however, they discovered that their most expensive MS drug was relegated to a special category that required them to pay a much higher share of the cost. Together, they can expect to pay nearly $9,000 a year for their medications and about $1,500 apiece in some months -- a cost that’s almost impossible for them to meet.

“The drug is on the formulary, but we can’t afford to buy it,” said Marion, referring to the list of covered medications.

Months after the government rolled out the most important new healthcare benefit for the elderly in decades, beneficiaries are still discovering new catches in the program’s complicated inner workings -- details that can defy the scrutiny of even the most careful consumers.

Whereas many officials had expected the drug plan’s problems to be subsiding by now, as beneficiaries learn to navigate its admitted complexities, the Youngs and other recipients are discovering new surprises in the fine print.

And, with a May 15 deadline looming for choosing or switching providers, many are running out of time. Once beneficiaries pick a Medicare prescription plan, they must generally remain in it for a year. This year, all beneficiaries can make one switch before May 15.

“Medicare Part D is like a plan from outer space,” Joseph Young said in a recent interview. “It’s a deceitful thing to have done to people.”

Although 75% of seniors enrolled in the new drug plans say they are satisfied, a Kaiser Family Foundation poll released last week found their enthusiasm is lukewarm. When asked to grade the new benefit, only 8% of enrolled seniors gave it an A; 13% gave it an F. The most common grades were Bs and Cs, each drawing 30%.

Although a majority of enrolled seniors said they expect to save money, the poll found that about 1 in 5 said their medications would now cost more, and roughly the same proportion said they had had problems getting prescriptions filled.

Many of the problems arise because of tensions that lie at the heart of the program. Medicare Part D was created to give needed medications to the elderly at affordable prices. At the same time, it was supposed to hold down the overall cost of healthcare. In trying to achieve both goals, while also making profits, the private companies that deliver the benefits have created plans that are not only complex but are also laced with little-understood provisions that shift costs to patients.

What the Youngs and thousands of others in similar situations have run up against is a wrinkle called a “tier,” a feature common to many of the private insurance plans that deliver Part D benefits. While all plans have long lists of covered drugs, or formularies, many also have separate categories, or tiers, for some of those drugs -- often those priced at more than $500 a month. Drugs in the upper tiers carry substantial extra costs for patients.

The coverage tiers are just the latest example coming to light of how some of the finer points of the plan don’t become clear until seniors have signed up. Unless beneficiaries look closely at plan materials, they may not realize their drug is on a higher tier. Similar wrinkles have included restrictions on some mental health drugs, seemingly modest co-payments that cumulatively strain the budgets of low-income seniors, and coverage of intravenous drugs -- but not the supplies and nursing assistance to administer them.

Medicare “gives considerable flexibility to the plans, and many have chosen to derive a significant percentage of revenue through these patient cost-sharing mechanisms,” said Dan Mendelson, president of Avalere Health, a healthcare consulting firm. “The downside is that if you have certain illnesses, you are going to be paying more.”

Mendelson said his firm’s examination of nearly 3,000 variations of Medicare drug plans showed that they make greater use of cost-sharing tiers than comparable plans that private employers set up for workers and their families. While the typical employer plan has three cost tiers, the most common type of Medicare plan has four or more tiers. Some plans have as many as eight.

Even critics agree that some form of cost containment is essential. But benefits need to be considered too, they say. “We can’t keep buying everything that comes through the FDA pipeline, but here it seems like cost is the first consideration, and that’s not appropriate,” said Larry Sasich, a professor of drug policy in the School of Pharmacy at the Lake Erie College of Osteopathic Medicine. “This just looks like cost shifting.”

Insurers defend the practice. Charging higher prices for a relatively small number of drugs, they say, helps keep the cost of many other medications low. And despite its shortcomings, most experts agree that the prescription program is better than no drug coverage, the predicament that about 25% of seniors and disabled Medicare beneficiaries faced before the Jan. 1 inception of Part D.

Still, coverage tiers mean many Medicare recipients will have little choice but to try to absorb higher costs than they expected.

Co-payments for drugs on the bottom three tiers are usually a fixed dollar amount, ranging from $5 a month to $60 a month. But on the higher tiers, patients pay a percentage of the price, usually 25% but sometimes more, according to Avalere. With some medications priced at $50,000 a year or more, that share can be too much for many people.

An earlier study from Kaiser Family Foundation also found wide differences in coverage policies and the costs paid by beneficiaries among 35 major Medicare prescription plans. “With so much variation, it’s critical that the government monitor the plans’ formularies and restrictions carefully to ensure people with Medicare get a fair deal, no matter what plan they choose,” said Jack Hoadley, a Georgetown University researcher who coauthored the report.

The MS drug that Marion, 61, and Joseph Young, 62, take is expensive. Copaxone costs $1,460 for each a month, and their 25% share works out to $365 apiece. However, in the coverage gap known as the “doughnut hole,” each must pay the full $1,460 until Medicare’s “catastrophic” benefit is triggered -- after the Youngs have each spent $3,600 of their own money. The Youngs are not eligible for Medicare’s low-income subsidies, and there is no generic alternative for Copaxone. The Youngs live modestly but not below the poverty line. Previously, their drug needs were covered by an assistance program that was terminated when Plan D went into effect.

Multiple sclerosis is a disease in which the immune system turns on the body, attacking the protective coating of nerves in the brain and the spinal cord. The four standard MS drugs are among the medications most commonly found on high-cost tiers, according to Avalere research.

Organizations representing cancer and arthritis patients are also concerned about the implications for their patients, who rely on biologicals -- cutting-edge medications made from living organisms -- and other costly drugs. Many of these patients found themselves in the doughnut-hole coverage gap by February.

Medicare officials point out that once people with high drug costs get through the doughnut hole, Medicare will cover 95% of the bill. For the Youngs, that would bring down the monthly cost of their Copaxone to $73 apiece.

“For the very high-cost drugs, those people will reach catastrophic insurance quickly, then their exposure will be 5%,” said Dr. Jeff Kelman, chief medical officer for the division of Medicare that handles the prescription benefit.

But the Youngs will have to spend about $7,200 of their own money before they reach the catastrophic coverage. “Right now, we don’t have it,” said Joseph. “There’s no way.”

The Youngs, who live in Queens, N.Y., say they don’t believe they can get a better deal from another drug plan before the May 15 deadline. They are trying to find a charitable organization to help with their bill. Executives of some leading Medicare prescription plans say only a small proportion of the drugs they cover are on the highest cost level, which helps keep prices lower for such commonly used medications as diabetes drugs and diuretics.

“We put all our lower-cost products at a $5 co-pay -- if I started putting some of these higher-cost products into the lower-cost category, my $5 co-pay may go up,” said Tom Paul, chief pharmacy officer for the drug plans offered by UnitedHealth Group, including the AARP MedicareRx plan.

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How to get advice about the plans

Here are some resources to help you better understand the new drug benefit plan.

* Medicare has experts available to answer questions over the phone at (800) MEDICARE. Or you can get information from the agency’s website, www.medicare.gov.

* Medicare Access for Patients Rx, a coalition that helps beneficiaries with special needs, has launched a website with information on the government’s new drug plan. Go to www.maprx.info.

* Each county in California has a Health Insurance Counseling and Advocacy Program (HICAP) office that provides free one-on-one Medicare counseling. (You can even request that they come to your house.) Go to www.calmedicare.org, or locally call the Center for Health Care Rights at (800) 434-0222.

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-- Ricardo Alonso-Zaldivar