With the first enrollment deadline a week away, the Medicare prescription benefit apparently is achieving its primary objective: helping millions of Americans get protection they did not previously have against one of the most draining problems of growing older.
By the May 15 deadline, federal officials expect to have more than 20 million seniors enrolled in plans under Medicare Part D, as the benefit program is called. That would include at least 7 million who previously lacked insurance for outpatient prescriptions. Of the millions who have signed up, many are enjoying significant savings, sometimes $1,000 a year or more.
That’s a considerable achievement for a government that has not tried to roll out such an ambitious entitlement program since the days of Lyndon B. Johnson. It’s especially so for President Bush, who is no fan of big government.
Even some of the program’s critics have given up trying to repeal it, while vowing to make it better.
And the performance of the drug plan, offered through private insurers, goes well beyond benefits for today’s seniors. The plan is a test of Bush’s idea that, instead of creating new federal bureaucracies, Washington can use businesses, informed consumers and market competition to solve knotty social problems such as access to healthcare -- potentially for all Americans.
“This is the first full test of competition in Medicare,” said Joseph Antos, a health policy expert at the American Enterprise Institute, a conservative think tank. “It’s also a test of consumerism in healthcare.”
So if Medicare Part D is meeting its goals and helping millions of elderly Americans, why isn’t it being hailed as an unqualified success?
For one thing, the system remains so complex and hard for seniors to navigate that many have yet to enroll, including about 2 million who live near the poverty line and would benefit from its subsidies.
More important, Part D may not be working so well for a substantial minority of patients -- seniors with complex illnesses and those requiring relatively expensive medicines. These patients often face high costs under the new program that threaten to put needed treatment beyond their reach.
A recent poll for the Kaiser Family Foundation found that 19% of enrolled seniors said they expected their medications to cost them more under Part D, compared with the 55% who said they would save.
That’s because private insurance companies are quietly putting these medicines into special coverage tiers that carry higher costs for patients. Doing this helps companies meet the twin goals of saving taxpayers money while earning a profit.
Officials of organizations representing patients with multiple sclerosis, mental illnesses, arthritis and cancer have expressed particular concern about the plans’ coverage policies.
Another problem is that many pharmacists say they continue to experience difficulties with such basics as timely payment. Pam Grisnik of Grove City, Pa., told Congress recently that more than a third of her fellow pharmacists around the country feared Part D would put them out of business.
Looking ahead, the program faces challenges:
* Simplifying the plans and the choices so that seniors who have remained outside the program will be induced to join.
* Finding ways to make Part D work as well for patients with special needs as it has for the majority.
* Dealing with issues raised by pharmacists and others whose continued cooperation is vital to the program’s success.
Further down the road, financial problems await. Part D does not have its own dedicated revenue stream or tax base. It’s financed with general tax revenue and premiums paid by beneficiaries. Costs are running below initial projections, but the rosy outlook is bound to change. The program’s long-term financial shortfall is estimated to be greater than that of Social Security’s.
But for now, the insurance companies and the government vow to fix problems and make the Bush approach work. And, overall, they say it’s working well.
Karen Ignagni, the top health insurance lobbyist in Washington, said the industry improved on the standard benefit originally designed by Congress by making changes such as eliminating a $250 annual deductible.
“This is an important benefit, and it is working for seniors,” said Ignagni, president and chief executive of the American Assn. of Health Plans, a trade group for private health insurers. “We exceeded expectations.”
Pharmacists, among others, are not so sure about that.
Many have discovered that they received more money when the government paid them to dispense medications to millions of poor beneficiaries covered by Medicaid than they do now under the Medicare benefit through private insurers. “Reimbursements are too low and too slow,” Grisnik said.
In turn, pharmacists have shifted some of the financial pressure onto the poorest beneficiaries. In the past, many pharmacists felt they could afford to waive nominal co-payments charged by Medicaid, or Medi-Cal in California. That’s no longer the case.
“A pharmacy, under Medi-Cal, would get a $7.25 professional dispensing fee,” said Stan Rosenstein, California’s deputy director of medical services. “Under one of these plans, they might get a $3 fee, and if they waive the co-pay, they are effectively waiving their reimbursement for professional work.”
Democrats blame the private middlemen for such problems.
Rep. Pete Stark (D-Fremont) said the government could reduce costs by negotiating prices directly with drug makers, then plowing the savings back into improving the benefit.
“We are going to have to give the secretary [of Health and Human Services] authority to bargain and bring the cost down,” said Stark. “If we do that, we can get rid of the doughnut hole. People are not used to having a benefit that comes and goes and comes back again.”
The “doughnut hole” Stark was referring to is a coverage gap that begins after seniors reach $2,250 in total drug expenses for the year. After that, beneficiaries are responsible for the next $2,850 in costs. When coverage resumes, Medicare pays 95%.
Health and Human Services Secretary Mike Leavitt said he does not seek such bargaining authority and, more important, seniors don’t need him to have it. Private insurers will find ways to shrink the coverage gap if seniors demand it, he said.
As proof that privatization is already working, Leavitt points to estimates that the program’s net cost to the federal government will be $678 billion over 10 years, instead of the $737 billion projected last year.
“The market is clearly reducing costs,” Leavitt said. “The fact that people have been able to select plans that meet their needs will in the long run be the strongest asset this program has.”
But economists say there are many other possible explanations for costs being lower than forecast: For example, the early estimates of government actuaries could have been off.
The May 15 enrollment deadline is another sore spot for critics. Seniors who delay signing up face a lifetime penalty that will grow over the years. But the administration is firmly rejecting recommendations to extend the current signup until Dec. 31.
Granting an extension -- or waiving the late-enrollment penalty -- is a popular idea among seniors. “To charge seniors a penalty is absolutely ludicrous,” said Ed McCullough, 68, of San Juan Capistrano. “There is still too much information out there that is unclear for a lot of people.”
Indeed, many of the materials Medicare prepared to help seniors understand Part D could rival IRS forms in complexity, a report last week from the Government Accountability Office suggested.
Medicare Administrator Mark McClellan said he had been working to make the program more user-friendly, and he pointed to a string of recent agency actions.
They include a directive limiting the ability of insurers to force patients to switch drugs; a standard appeals form doctors can use when a patient is denied a medication; and a set of common computer codes for pharmacists to communicate more easily with drug plans.
“We are looking ahead to ensure we address any issues facing people with Medicare, caregivers, providers, the plans and pharmacists in the future,” McClellan said in a statement to the House Ways and Means Committee.
Around Health and Human Services headquarters in Washington, the new buzzword is “Version 2.0.” Next year’s Medicare drug benefit will feature fewer plans and better benefits, Leavitt said.
“We will see Medicare Version 2.0 much informed by what we have learned in Version 1.0,” he said.
Meanwhile, many seniors are counting their savings -- and hoping to avoid another round of confusion next year. Martha Straub, 86, a retired secretary from Woodland Hills, gives her new drug benefit an A and the signup ordeal a D. That averages out to a C+.
“It’s very hard for an individual to dial in the plan that’s going to be most beneficial to you,” said Straub’s daughter, Lorna Bashara, who helped her mother. “It was like looking for a needle in a haystack.”
Now that the search is over, Straub said, she expects to save $1,746 on medicine this year and has started to think about ways to spend the extra cash.
“I can go to the beauty parlor once a week now,” she said.