Transcript Medicare Part D2a

Medicare Part D:
Free to Choose or No
Choice At All ???
Most Governmental Spending is
Accounted for by 2 Great Social
Insurance Plans
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Medicaid targets the poor and covered
37.5 million people in 2004
Medicare covers citizens over the age of
65 and in 2004 covered 39.7 million
people
In Both Systems Health Insurance
is Socialized:
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But the medical care is provided by the
private sector
Medicaid is a state-federal matching
program with states providing 40% of
funds
Medicaid is financially unstable and
subject to the whims of elected officials
Medicare is a purely federal program with
a strong political constituency
Medicare is a Single-payer
System
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Medicare has lower administrative costs
because it does not spend large sums
fighting adverse selection
Medicare does not screen applicants or
differentiate coverage among individuals
Medicare spends less than 2% of its
resources on administration
Private insurers spend more than 13% on
administration
Many Seniors Face Problems
Paying for Prescription Drugs
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Congress passed the Medicare
Modernization Act in 2003
The bill ensures that private insurance
companies provide the benefit instead of
the Medicare administration
This design increases the cost of drugs as
well as the administrative costs
Major Problems with the Medicare
Drug Benefit
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It prohibits direct negotiation between
Medicare and the pharmaceutical industry
The relative advantages and
disadvantages of various plans are difficult
to recognize
Insurers can change their benefits after a
plan has been selected and a drug may be
dropped from the “covered list”
The drug program is too complicated
The Pharmaceutical Industry
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Prices for drugs are typically more than
2000 percent above their cost of
production
Evidence shows that there has been a
multi-billion dollar windfall to drug
manufacturers as a result of the transfer
of drug coverage from Medicaid to Part D
plans
Pharmaceutical Industry Continued
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Main goal of the pharmaceutical lobby is
to ensure there is no governmental
interference with their ability to charge
high prices
The pharmaceutical industry is a tight,
global oligopoly with significant pricing
power in the United States
The Marketing of Drugs
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More money is spent marketing products
to doctors than in developing the drugs
sold by the drug companies
From 1996 to 2001 the pharmaceutical
sales force in America doubled =90,000
reps
Drug reps give gifts to doctors for writing
scripts- doctors also market drugs to other
doctors
More Medicines From Abroad
Seized
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Canadian pharmacies purchase brandname drugs at low wholesale prices
negotiated with the purchasing power of
the Canadian government
Federal regulators have cracked down on
drugs ordered from abroad, especially
those from Canada
The seizures appear to have coincided
with the launch of Medicare’s drugdiscount program
What Do We Know So Far?
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Kaiser Family Foundation reported in 2004
that 25% of eligible seniors could pay less
buying drugs on their own than through
the new Medicare program
Government is well-suited to pool risk and
provide insurance (see Social Security and
Medicare)
Writing private insurers into the drug
program equation adds expense and
complexity
The Unraveling of Employerbased Health Insurance
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The rise in Medicaid coverage
results from the growing number of
people who have lost their
employer-provided health insurance
Without Medicaid, the uninsured
population would have increased
even more than it has
State and federal governments are
increasingly paying the tab for
health care that used to be provided
by employers
The Plan: After the $250
Deductible a Retiree Finds
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The insurer covers 75% of the next $2000
in drug costs
Then assistance vanishes through the
“doughnut hole”
Total expenditures must exceed $5,100
and then insurers cover 95% of additional
drug costs
The Paradox of Choice
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Given too many options the rational
person is more likely to be paralyzed than
to pick wisely
Beneficiaries tend to focus on premiums or
out-of-pocket costs: not the array of
factors that actually determine which plan
is best
Beneficiaries who haven’t signed up by
May face enrollment penalties
Is This a Ploy to Get Everyone into
Medicare HMO’s?
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Seniors may feel that compared to the
labyrinth of premiums and cost-sharing,
arrangements of stand alone PDP’s,
Medicare HMOs are easier
Without the requisite sign ups, PDP’s will
lose bargaining leverage with drug
manufacturers and plans will collapse
Medicare not Social Security is on
an Unsustainable Path
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Health costs are growing so much faster
than the rest of the economy
The Bush administration is pushing to
make tax cuts permanent thus forcing cuts
in Medicare based on the growing gap
between revenues and outlays
We can ration care, reign in spending or
raise revenues
The Bush Administration
Encourages the
Wrong Kind of Insurance Policies
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Insurance companies pay only for things like
$30,000 amputation fees for patients with
diabetes- but not the $150 visit to the podiatrist
Payments are made to respond to symptoms,
when they should be encouraged to promote
health
It’s not a question of whether medicine has
become a business, as what kind of business it
has become??
Free Market Ideologies are
Inappropriate for Health Care
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Higher spending on those with good
insurance occurs by consigning more
people to poor insurance or none at all
Most health costs are incurred by a small
proportion of the population whose
expenses greatly exceed limits on out-ofpocket costs
US system relies on private rather than
public health insurance which raises costs
What about a National Health Care
System??
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Health care should be a fundamental right
and a public rather than a private good
The US is unique in not sponsoring
government-controlled Universal Health
Insurance
There are appalling inefficiencies in our
system with approximately 30% of
American health care spending wasted
Selected Sources
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New York Times, Health Care Confidential by Paul Krugman. January 27, 2006
New York Times, Pharmacists Say Drug Plan Threatens Their Livelihood by
Robert Pear, March 13, 2006
Washington Times. Junk Medicaid by Alex Gerber. January 29, 2006.
New York Review of Books, The Health Care Crisis and What to Do About It
by Paul Krugman, Robin Wells. Volume 53, Number 5 · March 23, 2006 .
New York Times, For Some Who Solve Puzzle, New Medicare Drug Plan
Pays Off by Robert Pear, March 26, 2006
Center for Medicare Advocacy, Prescription Drugs Cost More Under
Medicare Part D Than Under Medicaid, February 16, 2006.
The Century Foundation. Launching the Medicare Drug Benefit: The Good,
the Bad, and the Ugly. October 28, 2005
The Century Foundation. Medicare Part D: Watch Those Numbers. January
26, 2006.
New York Times, More Medicines from Abroad Seized by Lisa Girion.
February 11, 2006.
The Atlantic, The Drug Pushers by Carl Elliot. April 2006.