Married to Medicare For Better or For Worse?

Married to MedicareFor Better or For Worse?

Walter Tsou, MD, MPH

All

Ages

18-24 25-29 30-39 40-49 50-64 65+

Pleased 20% 15% 12% 21% 25% 23% 16%

Disappointed 25% 11% 12% 17% 22% 33% 51%

Not sure/Don’t know enough

54% 73% 77% 61% 53% 44% 33%

Congress has passed a new Medicare bill that includes a new prescription drug benefit. Which of the following best describes how you feel about the new Medicare bill?

Wall St. Journal, Dec 15, 2003

Medicare facts 40 million beneficiaries Over $240 billion dollars Eligible

65+ End Stage Renal Disease Chronically disabled under 65

Hospital and Physician care Part A - Hospital care

usually no premium Deductible - $840

Part B - Medical insurance for doctors, durable medical equipment Premium - $58.70 per month (25% of cost) Deductible $100/yr Copay - 20% on approved care

Medicare HMOs Called Part C Also called Medicare + Choice Now renamed Medicare Advantage

Prescription Drugs New benefit is called Part D

What do we like about Medicare? Universal program for elderly No means testing National program Free choice of doctors, hospitals

What needed improvement in Medicare? No prescription drug coverage Very limited nursing home coverage No dental coverage Increasing amount of

copays/deductibles Enrollment limited to Jan-March

annually

Campaign Promise

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Political philosophy on gov’t Republicans - limit the size and role of

government Democrats - maintain or expand the

role of government

Political philosophy in Medicare Republicans

expand HMOs Offer Rx drugs

through private agencies

Offer “choice” Limit federal dollars

Democrats Strengthen

traditional Medicare Offer Rx drugs as

part of Medicare Oppose vouchers for

Medicare Subsidy for the poor

What should a Rx benefit look like vs. what we will get?Ideal drug benefit Universal benefits

for all in Medicare Affordable, even for

low income Available for all

drugs Costs largely

covered

What we will get Benefits vary from

private plan to plan Less than 25% of drug

costs covered Drugs limited to

formulary “Front end” and

“catastrophic” coverage

Prescription Drug Plan is a small part of what passed Conservative legislators would not pass

without the creation of: Health savings accounts Increased payments to rural hospitals Major subsidies to large companies to

continue to cover prescription drugs Privatization of Medicare

Major change in Medicare Means tested

Special subsidies for low income Additional costs for high income

Administratively very complex Major shift toward HMOs

Eligibility Anyone with Medicare Part A or B

Prescription discount card Marketing in April Starts in May, 10-25% off retail $30 annual fee Benefits decided by pharmacies, HMOs,

PBMs, Medigap insurer Low income (<135% of poverty) beneficiaries

get $600 added to card, but still pay 5-10% copay for each prescription

How does the prescription benefit work? Starts in 2006 Will create Medicare Part D It is “voluntary”, but if you don’t join in

2006, your premiums will rise at least 1% per month. It is assumed if you waited to join, you

must be ill and therefore more costly to insure

Monthly premium Premiums set by the HMOs On average, it will be $35/month On average, it will be $58/month in 2013 It will rise higher in areas with no competition

or high prescription costs Payment can be paid directly from:

SS check Electronic deduction from your bank acct

Very low income seniors Determined by Medicaid/SSA Less than 135% of poverty and Earn less than $6000 singles Earn less than $9000 couples

No premium

Low income seniors Less than 150% of poverty Earn less than $10,000 single Earn less than $20,000 couple

Sliding scale discount of the premium

Deductible $250 in 2006 Will rise annually based on growth of

Medicare prescription spending Estimated to be $445 in 2013

Very low income seniors Determined by Medicaid/SSA Less than 135% of poverty and Earn less than $6000 singles Earn less than $9000 couples

No deductible

Low income seniors Less than 150% of poverty Earn less than $10,000 single Earn less than $20,000 couple

$50 deductible, 15% copay

Part D Rx benefits Private plans provide benefit (premium support) Pharmacy benefit managers/HMOs Formulary created There will be higher copays based on generic vs.

trade names Around $35/month in year one If you don’t sign up in year one, premiums rise

considerably

Stop Loss Threshold $3,600 in 2006 Rises to $6,400 in 2013 After threshold, you pay 5% copay for

drugs.

Could you lose money? Yes, let’s say you spend $650 in drugs

annually Your cost = deductible + copay +

monthly premium You pay $250 +25% of $400+$35/mo x

12 =$770

Who provides the drugs? Prescription drug plans (PDPs)

Pharmacy benefit managers Mail order houses Retail pharmacists

HMOs Medicare “Advantage” e.g. Senior Partners, US Healthcare, etc. Based on HMOs formulary

HMOs must share risk If enrollees spend too much on

prescription drugs HMO must bear the additional cost May raise their premiums May limit brand name drugs

HMO can create formulary May restrict their formulary

Senior may appeal if drug is necessary Physicians are prohibited from appealing Drug must not have a formulary equivalent

Formulary may have as little as two drugs for each therapeutic class

HMOs vs. traditional Medicare From 2010-2016, traditional Medicare

will have to compete with the HMOs in six regions in the United States

HMOs get $14 billion subsidy to skim off the healthy leaving traditional Medicare with the sick.

Medicare HMOs will probably grow from 15% to 40%

HMOs vs. traditional Medicare

Traditional Medicare will probably raise premiums because they insure the sicker seniors.

If HMOs prove cheaper, Congress will end traditional Medicare and have every senior go into an HMO.

Major agenda Very complicated Privatize Medicare “Consumer oriented” health care Cut federal role in health care

Who wins? Private plans

Despite evidence that Medicare HMOs overcharge Medicare

Pharmacy benefit managers Drug companies($91 million lobby) Lawyers (Tom Scully left after bill passes) Rep. Billy Tauzin (Chair of Energy and

Commerce hired by Pharma for $2+ million?)

As an aside . . . Elderly members of Congress will

continue to get their generous drug benefit and not from Medicare

Who loses? Traditional Medicare

Means tested Non uniform benefits Home for the sick and poor

Federal deficit will worsen Most Medicare beneficiaries will be

confused Your grandchildren

Six Problems with the Bill It means tests Medicare It makes Medicaid seniors pay more It will probably destroy traditional Medicare It prohibits Medigap insurance from covering

the “gaps” It creates health savings accounts which will

destroy traditional health insurance It prohibits Medicare from negotiating better

prices for seniors

Medigap insurance Any Medigap insurance that pays for

prescription drugs will be stopped in 2006.

All other Medigap insurance plans may continue

In short, you cannot buy Medigap insurance to cover the “gaps” in Part D

Health savings accounts Tax favored savings accounts which

give tax breaks to the healthy. Will skim off the healthy leaving

employers with higher health costs for those remaining.

Medicare is handcuffed Cannot use its purchasing power from

from negotiating lower prices with drug manufacturers

Prohibits importation of drugs from Canada

Strongly influenced by the pharmaceutical lobbyists

Cost of Prescription Benefits Estimated cost of Rx drugs over the

next 10 years is 2 trillion dollars During Medicare debate, Rx plan over

the next 10 years was to be $400 billion New estimate AFTER passage of the

bill is $534 billion

Analyst forced to lie about true cost of Medicare

Source: Phila Inquirer, March 13, 2004

Medicare Part A bankrupt by 2019? Seven years sooner than 2003 estimate

Rising health care costs Prescription drug benefit Inadequate funding

Surpasses Social Security in cost by 2024

Medicare trustee report, March 23, 2004

Who pays for the Rx drugs?“The money comes from the public. Not today's public, but the public you have just sired and that's lying in your bassinet.”

James A. Lebenthal, chairman emeritus of Lebenthal &Company, the Wall Street bond dealer, NY Times, Aug 18,2003

Could a Rx drug benefit pass? In non election year, 0% chance In election year, it passed but will we be

better off?

Questions?