Married to Medicare For Better or For Worse? Walter Tsou, MD, MPH

All Ages Pleased20%15%12%21%25%23%16% Disappointed25%11%12%17%22%33%51% Not sure/Don’t know enough 54%73%77%61%53%44%33% 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 40 million beneficiaries Over $240 billion dollars Eligible 65+ End Stage Renal Disease Chronically disabled under 65

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

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

Prescription Drugs New benefit is called Part D

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

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

Campaign Promise

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

Political philosophy in Medicare 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

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 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

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

Eligibility Anyone with Medicare Part A or B

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

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

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

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

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

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

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

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

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

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

Could you lose money? Yes, let’s say you spend $650 in drugs annually Your cost = deductible + copay + monthly premium You pay $ % of $400+$35/mo x 12 =$770

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

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

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

HMOs vs. traditional Medicare From , 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 Very complicated Privatize Medicare “Consumer oriented” health care Cut federal role in health care

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?)

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

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

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

Medigap insurance Any Medigap insurance that pays for prescription drugs will be stopped in All other Medigap insurance plans may continue In short, you cannot buy Medigap insurance to cover the “gaps” in Part D

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.

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

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

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

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

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? In non election year, 0% chance In election year, it passed but will we be better off?

Questions?