Seniors See Foreign Drugs as Benefit Over Medicare
Medicare’s new drug plan was supposed to help people like Charlotte and Walter Kuglin -- retirees living on a modest income who pay for their prescriptions out of pocket.
The Florida couple are among the millions of seniors too well off for Medicaid but not lucky enough to retire with employer-based drug coverage.
The Kuglins, however, decided not to enroll in the landmark government program, known as Medicare Part D. They figure they will spend less buying their drugs the way they have for more than three years -- by mail from Canada.
“When you are on a fixed income like we are, you have to watch every penny,” said Charlotte Kuglin, a 75-year-old retired nurse anesthetist.
Many seniors have yet to sign up for Medicare drug coverage because they are confused by the array of plans -- each with its own premiums, co-pays, deductibles and lists of covered drugs and participating drugstores. But others are making a calculated choice to opt out -- and buy from foreign pharmacies instead.
These seniors are not bothered by the idea of relying on prescriptions filled by foreign pharmacists. Indeed, some say they prefer the ease of shopping by mail over schlepping to the drugstore.
And many have accepted the risk of paying a penalty if they change their mind and sign up for the Medicare program after the May 15 deadline. What matters most is how much they are spending now.
“By the time I factored in the monthly payments, deductibles, etc., the Medicare prescription drug plan offered me no greater benefits than buying my drugs from Canada,” said 72-year-old Pat Virden of Greenbelt, Md., another retired nurse, speaking at a recent congressional hearing.
Half of the $1.5 billion worth of drugs shipped by foreign vendors into the U.S. each year comes from Canada. RxNorth, a Minnedosa, Manitoba-based mail-order pharmacy, reports a small slowdown in orders from its biggest base of customers -- American seniors -- since Medicare launched the drug program Jan. 1. But Chief Executive Andrew Strempler said he wasn’t worried.
“Medicare is not going to put us out of business,” he said.
For many, “we’re still significantly less expensive than Medicare,” Strempler said.
Although some seniors may decide they don’t need Medicare drug coverage right now, experts say Medicare needs them -- or at least their premiums.
If too many relatively healthy seniors opt out of the government plan, the Kaiser Family Foundation warned in an October study, the program could be in trouble.
When the administration estimated the costs of the program, it assumed that most eligible seniors would sign up, with healthy seniors balancing sicker retirees who need more drugs, said Tricia Neuman, director of the foundation’s Medicare policy project.
“If the group that signs up has substantially higher average costs than the pool of eligible people, then premiums would rise faster than the administration projected,” Neuman said. Eventually, the Kaiser study said, Medicare drug plans could tip into what economists call the “death spiral.”
“Every time you raise rates, you chase more healthy people out of the system,” industry consultant Robert Laszewski said.
That could also make Medicare drug coverage unprofitable for some of the insurance companies that are offering the plan, Laszewski said. “If you are in the insurance business, you don’t want just the sick people signing up.”
It’s unclear how many seniors have decided to opt out of the program. Health and Human Services administrators recently said that the number of people enrolled as of Jan. 1 was “on track” to reach their goal of at least 28 million by May 15.
But some insurance experts and healthcare advocates say it is troubling that of the 14.3 million people enrolled at the start of the year, only 3.6 million had signed up on their own.
The rest were automatic transfers from state Medicaid rolls or already had drug coverage through Medicare Advantage HMOs.
“For all the hullabaloo and all the expenditures, they’ve only added somewhat more than 3 million people,” said Ron Pollack, executive director of Families USA, a healthcare advocacy organization. “That’s horribly disappointing.”
For seniors with major health problems, the Medicare drug plan is more than a good idea -- it is an economic lifeline.
These people can count on quickly spending more than the typical annual deductible of $250. They know that within a few months they will spend through the so-called doughnut hole -- a gap built into most plans that requires enrollees to pay out of pocket after the first $2,250 until catastrophic coverage kicks in at $5,100.
But about 25% of eligible seniors -- as many as 7.4 million people -- could find that buying drugs on their own would cost less than they’d spend on premiums, co-pays and other expenses that come with the Medicare plan, according to another Kaiser study published in 2004.
The Canadian option may be cheaper for seniors who spend less than $1,500 or between $3,000 and $6,400 for drugs each year, according to an informal analysis by the minority staff of the House Government Reform Committee.
For the rest -- seniors who spend between $1,500 and $3,000 or more than $6,400 -- the typical Medicare drug plan may be the better buy.
The break-even points vary, however, depending on drug needs and other factors.
Donna and Bill Whelan of Camarillo are pondering this calculation. They buy medications from around the world for her Parkinson’s and his heart problems, low blood pressure and prostate cancer through a nonprofit organization called Drugs4seniors Inc. They pay about $800 a month -- at least a third less than they were spending when they bought from domestic drugstores.
Now the Whelans are trying to decide whether the Medicare drug plan makes sense.
“I said to Bill,” said Donna, 75, “ ‘after we compare, if this is still less expensive, we ain’t taking it’ .”
For some seniors with modest medication needs, Medicare drug coverage is valuable only as a hedge against an expensive medical crisis or as protection against the penalty for signing up later. Philip Lambert, a 68-year-old San Antonio man who retired from his job as a church music director this year, signed up for a Medicare drug plan with a monthly premium of about $10 -- the lowest he could find to cover him in case of medical calamity.
In the meantime, he said, he and his wife will continue ordering medications from RxNorth at a cost of about $100 a month. That, he figured, is about $50 less than his co-pays would run under Medicare.
“I just felt like if it’s catastrophic, this [Medicare plan] will take care of that,” Lambert said. “And I can take care of the rest.”
Although it is technically illegal to import drugs from abroad, the Food and Drug Administration, by policy, overlooks purchases for personal use. Both the FDA and U.S. pharmaceutical companies, however, take a dim view of customers buying drugs from foreign vendors, warning that they run the risk of getting the wrong medications, poor-quality substitutes and even counterfeits.
Charlotte Kuglin isn’t worried. As a retired nurse anesthetist, she can see that the pills that arrive at her Leesburg, Fla., home inside bubble-wrapped envelopes “are exactly what we get here,” she said.
“The bottles are sealed. They come to you like they come from the factory.”
The difference is cost. For Charlotte’s diabetes and Walter’s heart murmur, high blood pressure and cholesterol, the couple spend about $3,800 a year on drugs from RxNorth -- hundreds of dollars less, they estimate, than their out-of-pocket expenses would run on a Medicare plan.
Friends and relatives ask Charlotte Kuglin what she thinks about the Medicare plan, and she is happy to tell them.
She said one friend was considering RxNorth after they talked.
“And he’s not the only one,” she said. “I’ve talked to a number of people. Sitting around playing cards, people talk about this stuff.”
As for the future? “Hopefully,” she said, “the Lord will keep us in good health until we drop dead.”