The new prescription-drug benefit for Medicare, passed in 2003, was controversial at passage, and much of that controversy has not gone away.
Limits on the size of the program resulted in an awkward benefit structure that creates a gap in coverage for beneficiaries who use substantial amounts of prescription drugs. The requirement that the benefit be provided by private plans — despite the fact that no such plans exist — was also heavily criticized. And since then, new issues have arisen, including arguments to delay or repeal the benefit on the grounds that it is not affordable.
Despite the substantial challenges that lie ahead, it would be a mistake to cancel these benefits. Beneficiaries have waited a very long time for improvements in Medicare coverage that most other insured individuals and families enjoy. And except for very low-income people with Medicaid protection or those with generous retiree wraparound coverage, paying for prescription drugs has added substantially to the high out-of-pocket costs that senior citizens and people with disabilities face. One way or another, someone has to pay, and the money set aside for these benefits can provide some important relief.
Although it makes sense to move ahead with the benefit, a number of issues need to be watched carefully. Particular attention needs to be focused on those with low incomes.
For example, people covered by both Medicaid and Medicare will face major changes as they are shifted from receiving their drugs under Medicaid to enrollment in one of the private plans. If they do not choose on their own, they will be randomly assigned to one of the plans whose premiums are below the average premium charge in a given area. Since some of these low-cost plans may be very restrictive, they may not serve these beneficiaries well.
Those most likely to gain from this new benefit are low-income people who have not been eligible for drug benefits under Medicaid but whose income and assets are low enough to qualify them for a comprehensive benefit. But they must sign up twice: first to certify eligibility for the low-income protections and then to choose a specific plan.
However, since many older people have been reluctant to sign up for other low-income benefits, this new benefit may not reach them. Special attention will be needed to ensure that low-income people do not fall through the cracks of this new benefit.
The complexity of the new drug benefit, which will begin in January, is already catching the attention of many Medicare beneficiaries. Unlike traditional Medicare, which offers a standardized benefit, the new legislation allows lots of variation and individuals must actively seek to enroll. And although the specific number of options available varies by where individuals live, every beneficiary will have many to choose from.
The choice will not be easy. Plans will vary in terms of premiums charged, the size of deductibles and co-payments, requirements such as prior authorization or trying less potent drugs before more potent ones will be available and exactly what drugs will be covered by each plan.
The large number of companies offering one or more options has been touted as an indicator of the success of the new benefit. And many of these plans have monthly premiums below the expected average of $35. But this also suggests that there will likely be aggressive advertising by plans seeking a market share large enough to keep the plans in business into the future.
Like other health-insurance ventures, these new plans may be offering better deals in the first year than they will be able to sustain over time. This suggests that next year’s open season may be just as confusing as this year, with some plans leaving and premiums potentially changing substantially.
So far, although the federal government has worked diligently to make information available and to get the system up and running, it is likely that many will need more help in making decisions than there are resources available to do so. This may also serve as an impediment to enrollment.
Another key problem arises from a missed opportunity to improve drug coverage. The rules in the new plans to restrict access to drugs within a particular category would make more sense if they were based on research into which drugs are the most effective and can be substituted for others with little risk of adverse effects. Instead, drugs on the formulary or with lower co-pays are more likely to be based on which manufacturers offer the most favorable discounts rather than on solid comparative information on drugs within a therapeutic class.
Patients and their physicians will face tough choices; for example, if one drug in a category is not covered by insurance, does it make sense to shift to another one? Here is an opportunity for Medicare to be a leader in advancing our knowledge of effectiveness, but it will take resources to do this.
Subsidizing the costs of prescription drugs for seniors and people with disabilities will help many to receive care that they now either forgo or sacrifice other purchases to afford. But it is also essential to modify the drug benefit over time if, as seems likely, it causes confusion and problems for the beneficiaries it serves.
Moon is vice president, director of health for the American Institutes for Research and author of the upcoming book Medicare: A Policy Primer.