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Early Look at Medicare Drug Plan Marketing Finds it
Unduly Complicated
The Century Foundation issues brief on the good, bad
and ugly
Oct. 29, 2005 The insurance companies are now
busy contacting senior citizens about the prescription drug plans they
will be offering on November 15 under the auspices of the new Medicare
Part D the prescription drug benefit. The plans do not become
effective until January 1, but The Century Foundation has released a
report on the early marketing of the plans and finds the drug benefit
overly expensive and unduly complicated.
In "Launching the Medicare Drug Benefit: The Good,
the Bad, and the Ugly," Leif Wellington Haase argues that, while the
initial efforts to enroll Medicare beneficiaries seem promising, the
benefit's unwieldy and overly complicated structure confounds efforts to
explain it.
Haase, a senior program officer and health care
fellow at the foundation, reports that though efforts at education have
been extensive and energetic, some ads and resources have already
provided inaccurate information. Further, while many more insurance
companies are offering plans than was expected, still only a quarter of
Medicare beneficiaries say they are sure they will enroll in the
voluntary drug program.
Following is the analysis by Leif Wellington Haase
of The Century Foundation.
Launching the Medicare
Drug Benefit:
The Good, the Bad,
and the Ugly
Earlier this month, Medicare began allowing private
insurers and other organizations that are offering prescription drug
plans to older Americans to begin marketing their plans. Today, the
marketing onslaught is in full swing. As the Medicare prescription drug
benefit gets under way, there is already one clear winner: character
actors "of a certain age" who are blanketing the airwaves. Not to be
outdone, PacifiCare has dusted off old episodes of "I Love Lucy" and
added digitally-altered Medicare themes. The government's marketing
campaign asks America to "Pull up a chair. We've got something good to
talk about."
Do we really? In spite of this packaging, the
Medicare prescription drug benefit remains at its base an overly
expensive and unduly complicated way to address a real social need. But
as the full implementation of the benefit draws near, some features are
coming into focus. What's promising? What isn't? Here's a quick summary:
The Good:
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●
Previous efforts to get private insurers to expand their participation
in Medicare have been a debacle. Under the Medicare+Choice program,
launched in 1997, private managed care plans quickly pulled up stakes
and were reluctant to enter rural areas. Thus far, to almost everyone's
surprise, insurers have been following the Field of Dreams model: the
program was built, and they have come. No state, even sparsely populated
Alaska, has fewer than eleven drug plans. States such as California and
New York feature more than forty choices.
●
Premiums are on average about 14 percent lower than anticipated. Every
state in the continental United States will have at least one drug plan
with a monthly premium below $20. This is good news for beneficiaries,
especially if it means that savings that insurers and their benefits
managers have been able to wrest from drug manufacturers are being
passed on. In large part the low premiums reflect plan competition over
initial market share and their eventual survival in the marketplace.
What's the tradeoff for low premiums? Usually incredibly complicated
benefit structures with different rules about deductibles, co-payments,
and which drugs are covered.
● As of
late September, about 3 million applications had been received by the
Department of Health and Human Services by individuals who seek to
qualify for low-income subsidies under the drug benefit. Officials think
that about 15 million Americans might qualify for assistance. About half
of these will automatically be enrolled by managed care organizations.
It isn't clear how many of these applicants will actually be eligible,
but the numbers are promising. Low-income seniors and disabled Americans
receive by far the most relief under the new coverage. According to a
recent study by PriceWaterhouseCoopers, beneficiaries with incomes of
$14,500 or less (150 percent of the federal poverty level) will save 90
percent in out-of-pocket costs under the new coverage.
● The
efforts toward beneficiary education have been extensive and energetic,
if not always accurate or effective. Humana is spending $80 million on
its outreach efforts, including a fleet of 10 RVs that made almost 500
stops around the country. Aetna plans to spend about $50 million, and
other companies are dedicating substantial amounts. The federal
government is spending half a billion dollars and has designated over
9,000 employees to answer questions about the benefit.
The Bad:
● Even
though the efforts at educating beneficiaries have been strong, they
have been plagued by troubling glitches. A government ad that ran
nationally in Parade magazine wrongly stated that low-income
beneficiaries could join any freestanding drug plan without paying an
additional premium. After the government released its online plan
comparison feature last weekitself well behind scheduleit failed to
include the prices plans will charge for specific drugs. This makes it
difficult or impossible for older Americans to make educated choices
about whether to join a plan, or which one to select.
●
Medicare beneficiaries are still reluctant to sign up. A Gallup poll
released in early October showed that over half of Medicare
beneficiaries didn't plan to sign up for a prescription drug plan. Fewer
than a quarter said that they would definitely join the program. If you
think the benefit is simply a disaster from the get-go, this isn't such
a bad thing. But if older Americans don't sign up in the expected
numbers, or if the majority of those who do sign up have high drug
costs, premiums will rise, plans will lose leverage with drug
manufacturers, and the whole program will fall flat. (Enrollment in
Medicare managed care plans will probably grow as drug-only plans
collapse, which may have been the underlying expectation in the first
place.) Predictably, the media has been playing up the angle that
Medicare beneficiaries are "dazed and confused" by the benefit. But what
matters ultimately is whether seniors and disabled Americans grumble and
sit on their hands or complain and eventually join up.
The Ugly:
●
Beneficiaries who sign up for a drug plan after May 15, 2006 will face
substantially higher premiums. (The promotional material for the benefit
refers, somewhat euphemistically, to the need to join a plan to get
"peace of mind." The punitive aspect has been deemphasized.) While the
penalty is wholly legitimate as a matter of benefit design, it is sure
to cause consternation among beneficiaries. Medicare's voluntary Part B,
which covers physician and other services, has a similar built-in
premium penalty. However, the default option for Part B is toward being
enrolled rather than opting out (the Part B premium is automatically
deducted from an eligible beneficiary's Social Security check unless
stipulated otherwise). The drug benefit has the opposite design.
● On
January 1, 2006, about seven million "dual eligibles" who qualify for
both Medicare and Medicaid will be switched from their existing Medicaid
coverage into the new Medicare plans. This turnover is fraught with
potential problems. Most troubling is the prospect that some of these
poorer beneficiaries will find that a drug they need isn't covered under
their new plan.
●
Beneficiaries are likely to be tempted to join drug-only plans to take
advantage of posted low premiums, only to find that they have
unwittingly given up their comprehensive managed care plan that offers
full Medicare benefits. Under current rules, they will find it difficult
to rejoin their earlier plan.
● The
massive education effort simply underscores the unwieldiness and
unnecessary complication of the benefit. As it is panning out in
practice, the benefit represents choice overload at its worst. United
HealthCare, for instance, in partnership with CVS pharmacy, has released
a Show-Me Guide to the drug benefit. It is truly state-of-the-art:
careful, thorough, and well-written. It is translated into seven
languages, including Russian, Vietnamese, and Tagalog. It also runs to
24 pages and features a three-page glossary. Each hypothetical choice
requires selecting among multiple options. Conscientious newspaper
efforts to explain the benefit fall into the same unavoidable trap of
being unable to do so in simple yet accurate terms.
● The
traditional Medicare benefit didn't need extensive marketing because its
basic structure (from the beneficiary's standpoint) was straightforward
and its advantages clear. The new Medicare drug benefit fails this test.
By contrast, Julie Goon, the director of the national Medicare Outreach
campaign, touts the choice available under the new benefit: "If you want
to make a decision based on the cost of a plan, there are plans that are
very inexpensive, there are plans that cost more, there are different
ways to do cost sharing. If you are looking for coverage in the coverage
gap, there are plans that provide coverage for both generic and brand
name drugs in that coverage gap. There are plans with low or no
deductibles. So whatever works for a beneficiary, we have been trying to
provide that kind of choice for them." But if you want simplicity,
stability, and ease of enrollment, you have definitely come to the wrong
place.
Leif Wellington Haase is a senior program officer
and Health Care Fellow at The Century Foundation.
In-depth analysis of Medicare Part D is available
in "The Medicare Drug Benefit: Straight Answers to the Toughest
Questions," a guide to key policy questions about how the prescription
drug benefit will work, also by Haase. This guide, along with "Launching
the Medicare Drug Benefit: The Good, the Bad, and the Ugly," is
available at The Century Foundation Web site at
http://www.tcf.org and
http://www.healthpolicywatch.org .
The Century Foundation conducts public policy
research and analyses of economic, social, and foreign policy issues,
including inequality, retirement security, election reform, media
studies, homeland security, and international affairs. The foundation
produces books, reports, and other publications, convenes task forces
and working groups, and operates eight informational Web sites. With
offices in New York City and Washington, D.C., The Century Foundation is
nonprofit and nonpartisan. It was founded in 1919 by Edward A. Filene.
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