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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?. Wall St. Journal, Dec 15, 2003. Medicare facts.

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Married to Medicare For Better or For Worse?

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  1. Married to MedicareFor Better or For Worse? Walter Tsou, MD, MPH

  2. 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

  3. Medicare facts • 40 million beneficiaries • Over $240 billion dollars • Eligible • 65+ • End Stage Renal Disease • Chronically disabled under 65

  4. 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

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

  6. Prescription Drugs • New benefit is called Part D

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

  8. 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

  9. Campaign Promise

  10. Political philosophy on gov’t • Republicans - limit the size and role of government • Democrats - maintain or expand the role of government

  11. 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 Political philosophy in Medicare

  12. 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 What should a Rx benefit look like vs. what we will get?

  13. 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

  14. Major change in Medicare • Means tested • Special subsidies for low income • Additional costs for high income • Administratively very complex • Major shift toward HMOs

  15. Eligibility • Anyone with Medicare Part A or B

  16. 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

  17. 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

  18. 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

  19. 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

  20. 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

  21. Deductible • $250 in 2006 • Will rise annually based on growth of Medicare prescription spending • Estimated to be $445 in 2013

  22. 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

  23. Low income seniors • Less than 150% of poverty • Earn less than $10,000 single • Earn less than $20,000 couple • $50 deductible, 15% copay

  24. 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

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

  26. 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

  27. 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

  28. 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

  29. 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

  30. 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%

  31. 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.

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

  33. 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?)

  34. As an aside . . . • Elderly members of Congress will continue to get their generous drug benefit and not from Medicare

  35. 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

  36. 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

  37. 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

  38. 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.

  39. 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

  40. 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

  41. Analyst forced to lie about true cost of Medicare Source: Phila Inquirer, March 13, 2004

  42. 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

  43. 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

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

  45. Questions?

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