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Lost
in the Fine Print: Ten Overlooked Policies That Harm Medicare and Its
Beneficiaries By
the Center for American Progress While
many features of the Medicare Prescription Drug and Reform Conference
Agreement (H.R. 1) have received considerable attention, some important
provisions have gone relatively unnoticed. The following is a list
of ten issues whose impact has been largely overlooked. HIDDEN PITFALLS FOR SENIORS AND
PEOPLE WITH DISABILITIES 1. Severely Restricts Access to
Prescription Drugs The new law gives
private insurers the authority to ration access to drugs funded by
Medicare. Insurer-created committees decide what types of drugs to cover,
which specific drugs to include on their formularies, and how high to set
the beneficiary payment for each drug. It will be difficult and, in
some cases, impossible to get drugs that are not included on an
insurer’s formulary. These restrictions, rarely seen in today’s
private marketplace, mean that seniors who have drug coverage today could
have less access to drugs under the plan. Thus, even more
beneficiaries will lose under this law than the estimated 2.7 million
seniors losing retiree coverage and 6.4 million beneficiaries losing
Medicaid help. 2. Denies Beneficiaries Genuine
Choice Beneficiaries will
have to choose a drug insurer without knowing exactly what drugs that
insurer will cover. Even after they learn what drugs are on the
formulary, the insurer can change or remove drugs at any time. While
beneficiaries must be given notice, they have no option to change insurers
during the year to retain access to the drugs their insurer no longer
covers. This is a bait and switch. Moreover, if the law succeeds
in expanding HMOs and preferred provider organizations (PPOs), there is no
guarantee of any choice for beneficiaries in traditional Medicare. Drug
coverage will be available only through whatever private insurer plan
comes to their area, no matter how high its premium. 3. Allows Premium Variation
Based On Where You Live Medicare charges
all beneficiaries the same Part B premium. The new law allows insurers
rather than Medicare to set premiums for drug coverage. Furthermore,
it has beneficiaries, not the government, pay for local drug utilization
differences. Thus, premiums will be higher in areas with older or
sicker seniors. 4. Erodes Assistance Over Time Most seniors are
familiar, and dissatisfied, with the standard drug benefit. The law
increases each component of the benefit after 2006 by per-capita drug cost
growth – which is roughly three times the rate of inflation used to
increase Social Security payments. Thus, in 2013 compared to 2006, the
deductible will be $445 (from $250) and the catastrophic limit will be
$6,400 in out-of-pocket spending (from $3,600). As such, a growing
share of beneficiaries’ income will be spent on Medicare prescription
drug costs. FAILS TO REIN IN PRESCRIPTION DRUG
COSTS 5. Adopts Drug Industry-Preferred — and
Possibly Owned — Delivery System The new law
rejects the idea of reducing prices through group purchasing, instead
adopting an untried system of multiple, stand-alone prescription drug
insurers — an approach supported primarily by the drug industry.
Moreover, the Senate bill’s provision that would prohibit pharmaceutical
industry ownership of the private insurers delivering the drug benefit has
been stripped from the final law. This potentially allows
manufacturers to help set Medicare prices for their own drugs. 6. Prevents Medicare From Knowing The
Prices It Pays for Drugs The law includes
policies that limit insurer disclosure of prices to Medicare and excludes
policies that ensure adequate Medicare oversight. Insurers are
required to submit only their aggregate discount information and their
aggregate claims for reinsurance and risk corridor payments. Missing
from the law are provisions that would create strong enforcement tools and
allow inspectors general audits to ensure that Medicare and its
beneficiaries are not paying inflated drug prices. 7. Omits Reforms To Lower
Prescription Drug Costs Beyond Medicare A House-passed
provision allowing limited re-importation of U.S.-made drugs from other
countries was dropped from the final law. Additionally, no
consideration was given to polices that would reduce excessive
direct-to-consumer advertising and go further in improving access to
generic drugs. BIAS TOWARD PRIVATE PLANS EVEN BEFORE
'PREMIUM SUPPORT' KICKS IN 8. Promotes Private Plans At
Greater Taxpayer — and Beneficiary — Expense In the name of
competition, the Medicare law increase HMO payment rates immediately. By
2006, rates will be an estimated 25 percent higher than traditional
Medicare costs for the same beneficiaries. Additional financial
incentives – blended payment rates, risk corridors and a $10 billion
“stabilization fund” to promote regional and nationwide private plans
like PPOs — begin in 2006. This will exacerbate the current system
problems: HMOs and PPOs cost more, selectively serve profitable parts of
the country, arbitrarily discontinue coverage, and use premium and benefit
changes to attract healthy and avoid sick beneficiaries. 9. Steers Beneficiaries to HMOs and
PPOs Through Drug Benefit Design In addition to its
explicit promotion of private plans, the law provides them implicit
advantages through its prescription drug benefit. Unlike stand-alone
prescription drug insurers, HMOs and PPOs can lower their drug premiums
through higher cost sharing for basic Medicare benefits or health system
savings that result from adding a drug benefit. Moreover, in areas
with HMOs or PPOs, a single stand-alone drug insurer would have a monopoly
on coverage for all those in traditional Medicare. With little
incentive to keep premiums and prices low, stand-alone drug insurance
could be expensive, forcing some to join an HMO and leave their doctor to
obtain drug coverage. SHIFTS COSTS RATHER THAN CONTAINING
THEM 10. Increases Medicare Program
Spending — Beyond the Drug Benefit The Congressional
Budget Office estimates that gross Medicare spending, not including the
drug benefit, will increase by $5 billion over the next decade. This cost
is offset by savings from an increase in the Part B deductible and a new
income-related Part B premium. Thus, rather than providing true cost
containment, the law raises costs and hides this fact by shifting them
onto the beneficiaries. ©
Center for American Progress Copyright
© 2002 Global Action on Aging |
