Transcript Married to Medicare For Better or For Worse?

Married to Medicare
For Better or For Worse?
Walter Tsou, MD, MPH
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?
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%
Wall St. Journal, Dec 15, 2003
Medicare facts
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40 million beneficiaries
Over $240 billion dollars
Eligible
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65+
End Stage Renal Disease
Chronically disabled under 65
Hospital and Physician care
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Part A - Hospital care
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usually no premium
Deductible - $840
Part B - Medical insurance for doctors,
durable medical equipment
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Premium - $58.70 per month (25% of cost)
Deductible $100/yr
Copay - 20% on approved care
Medicare HMOs
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Called Part C
Also called Medicare + Choice
Now renamed Medicare Advantage
Prescription Drugs
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New benefit is called Part D
What do we like about
Medicare?
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Universal program for elderly
No means testing
National program
Free choice of doctors, hospitals
What needed improvement in
Medicare?
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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
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Republicans - limit the size and role of
government
Democrats - maintain or expand the
role of government
Political philosophy in
Medicare
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Republicans
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expand HMOs
Offer Rx drugs
through private
agencies
Offer “choice”
Limit federal dollars
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Democrats
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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
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Conservative legislators would not pass
without the creation of:
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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
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Means tested
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Special subsidies for low income
Additional costs for high income
Administratively very complex
Major shift toward HMOs
Eligibility
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Anyone with Medicare Part A or B
Prescription discount card
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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?
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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.
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It is assumed if you waited to join, you
must be ill and therefore more costly to
insure
Monthly premium
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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:
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SS check
Electronic deduction from your bank acct
Very low income seniors
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Determined by Medicaid/SSA
Less than 135% of poverty and
Earn less than $6000 singles
Earn less than $9000 couples
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No premium
Low income seniors
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Less than 150% of poverty
Earn less than $10,000 single
Earn less than $20,000 couple
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Sliding scale discount of the premium
Deductible
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$250 in 2006
Will rise annually based on growth of
Medicare prescription spending
Estimated to be $445 in 2013
Very low income seniors
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Determined by Medicaid/SSA
Less than 135% of poverty and
Earn less than $6000 singles
Earn less than $9000 couples
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No deductible
Low income seniors
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Less than 150% of poverty
Earn less than $10,000 single
Earn less than $20,000 couple
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$50 deductible, 15% copay
Part D Rx benefits
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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
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$3,600 in 2006
Rises to $6,400 in 2013
After threshold, you pay 5% copay for
drugs.
Could you lose money?
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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?
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Prescription drug plans (PDPs)
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Pharmacy benefit managers
Mail order houses
Retail pharmacists
HMOs
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Medicare “Advantage”
e.g. Senior Partners, US Healthcare, etc.
Based on HMOs formulary
HMOs must share risk
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If enrollees spend too much on
prescription drugs
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HMO must bear the additional cost
May raise their premiums
May limit brand name drugs
HMO can create formulary
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May restrict their formulary
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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
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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
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Very complicated
Privatize Medicare
“Consumer oriented” health care
Cut federal role in health care
Who wins?
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Private plans
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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 . . .
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Elderly members of Congress will
continue to get their generous drug
benefit and not from Medicare
Who loses?
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Traditional Medicare
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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
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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
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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
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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
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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
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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?
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Seven years sooner than 2003 estimate
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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?
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In non election year, 0% chance
In election year, it passed but will we be
better off?
Questions?