Medicare Drug Plan Starts Today

While critics and proponents battle over the new Medicare prescription drug benefit, its effectiveness depends on the beneficiary's income, drug needs and private insurer.

BALTIMORE (By M. William Salganik, Baltimore Sun) January 1, 2006 — It is projected to cost $724 billion over the next 10 years. It's expected to enroll nearly 30 million senior citizens and people with disabilities. It relies on private insurance companies to deliver a big new government benefit. It begins today.

Even before implementation of the new Medicare prescription drug benefit, the program is under attack from the left and right.

"It's a fascinating social experiment in using private sector resources to deliver a social benefit," said Dan Mendelson, president of Avalere Health, a Washington consulting company. "What Congress did was completely unprecedented - they created new markets and new products."

Its health impact remains uncertain. Among the factors with unknown impacts:

• Most enrollees in the program won't get coverage for drug costs between $2,250 and $5,100 a year. This so-called "doughnut hole" is a provision to keep costs down.

• Senior citizens, who generally are not used to managed-care limits on which medications they get, will find aggressive controls in some plans, according to Mendelson. These include efforts to switch patients to less expensive drugs.

• Because each private insurer decides which drugs it will cover, some people will find themselves in plans that don't cover the medications they take.

• For a variety of reasons, many people who could benefit from the new plans might not sign up. Also, if only the sickest enroll, premiums probably will increase steeply.

The Bush administration, aided by a narrow majority in the House and Senate, pushed through a program it described as a way to harness the power of the marketplace - let competing private insurers negotiate prices with drug companies, design their deductibles and co-payments, and set their premiums.

Critics on the left say the program omits the most effective way to save money: using the government's purchasing power to get lower drug prices.

"If we're really concerned about negotiating the best prices possible, the best way is to buy in bulk for all 43 million beneficiaries," said Judith Stein, director of the Connecticut-based Center for Medicare Advocacy. "Wal-Mart figured that out. Wal-Marts in Baltimore and in Hartford don't negotiate on their own."

Instead, she said, the new program "is moving Medicare in a more expensive and more privatized direction."

Critics on the right say the program is not a free-market exercise. Pointing to 1,132 pages of regulations, Robert E. Moffit, director of the Center for Health Policy Studies at the Heritage Foundation, said, "This is not a benefit designed by the private market."

Eventually, he said, "It's going to evolve into a government-run system. It's an entitlement. If you have an entitlement, there's no way government officials can control demand. The only way to control cost is a price-control system."

People with very high drug costs will save. Mendelson estimates that 3.3 million senior citizens who enroll will spend their way through the doughnut hole, then qualify for coverage of 95 percent of their drug bills.

It also clearly will benefit people who have incomes low enough to qualify for "extra help" but who don't have current coverage. That's about 7¹/2 million seniors, according to Congressional Budget Office estimates.

But 6.2 million low-income Medicare beneficiaries, who have been getting their prescriptions paid by state Medicaid programs, are being switched over to Medicare. Unless they chose a plan themselves, they have been assigned randomly to one of the private plans without considering whether it covers the drugs they are taking.