1. A Drug Coverage Option Under Original Medicare
The Best Medicine:
A Drug Coverage Option Under Original Medicare

2. Original Medicare is Social Insurance
Under Original Medicare, there is:
One Premium
One Benefit Package
One Risk Pool
All share the cost of caring for the sick.
Definitions:
Benefit Package - The list of services offered by an insurance plan.
Risk Pool - An accumulation of risk - as you put more and more people together you consolidate the
risk reducing the risk for each party that is a member of the group.

3. Original Medicare is Social Insurance
Because most medical providers accept Medicare, enrollees can go to almost any doctor or hospital in the country for medical services using their red, white, and blue Medicare card.

4. Part D is Different
People with Medicare purchase coverage from private companies.
Each plan has:
Different Premiums
Different Benefit Packages
Segmented Risk
Enrollees in other plans have access to different drugs at different costs, available at multiple pharmacies.
Definitions:
Segmented Risk – As opposed to one risk pool (as under Original Medicare), there are divided,
smaller risk pools in Medicare Part D. This results in increased cost to the consumer.

5. Part D is Different: The Doughnut Hole
Definitions:
The Coverage Gap is the period during which Part D plan enrollees pay the full cost of their
prescriptions.
-The gap will start when the total cost of an enrollee’s prescriptions—what the enrollee and his/her
plan have paid for covered drugs—reaches $2,510.
-The coverage gap ends when the enrollee’s total out-of-pocket costs for covered drugs (just what
the enrollee has paid) reach $4,050 in 2008.
-After that the enrollee will have “catastrophic coverage” and he/she will pay 5 percent of the cost
of each covered drug, or a copay of $2.25 for generics and $5.60 for brand-name drugs, whichever is greater.
Part D has a Coverage Gap (“Doughnut Hole”)
Begins at $2,510 in total drug costs
Ends at $4,050 in out-of-pocket drug costs
(Source: Kaiser Family Foundation)

6. Problems with the Privatized Benefit
Higher Costs for All Americans
Taxpayers Pay More:
Part D plans have failed to negotiate drug prices on par with the VA, Medicaid, or Canadian government.
Drug coverage through private plans carries higher administrative costs than the provision of medical coverage under Original Medicare.
Enrollees Pay More:
In the coverage gap, enrollees generally pay full price for covered drugs. Prices do not reflect manufacturer rebates or discounts negotiated by their Part D plans.
Part D plans pass on manufacturer price increases directly to consumers.
Data:
1a. Part D plans have failed to negotiate drug prices on par with the VA, Medicaid, or Canadian government:
A recent report by Families USA shows that the Veterans Administration (VA) had lower prices on all the top
20 drugs used by older adults than the prices charged by the Part D plans with highest enrollment.
-A recent study by Consumers Union found that Part D prices in a Florida county were on average
54 percent higher than the VA price.
-Testimony provided by Johns Hopkins University professor Gerard Anderson indicated that Part D plan
prices are 22 percent higher than Medicaid prices, and 31 percent higher than rates negotiated by the VA.
b. Drug coverage through private plans carry higher administrative costs than the provision of medical
coverage under Original Medicare: Medical coverage through Original Medicare carries a 3 percent administrative
cost. Private insurance companies generally take percent in administrative, marketing, and profit-related costs.
-Dean Baker of the Center for Economic and Policy Research estimated that eliminating administrative expenses,
marketing costs and profits by Part D plans would save the government $4.6 billion.
2a. In the coverage gap, enrollees pay full prices for covered drugs: Plans received $1 billion in rebates in
2007 for drugs enrollees purchased at full price during the coverage gap (“doughnut hole”).
b. In-year manufacturer price increases are passed on directly to consumers: According to a
2007 Consumers Union report,most Part D plans peg the prices they charge at the pharmacy to
the list price provided by drug manufacturers. Every price increase, therefore, is passed on directly
to consumers. The report also found that nearly all plans raised their drug prices from January to February of 2007,
after enrollees were locked into the plans for the year. A quarter of plans raised prices by more than five percent.

7. Problems with the Privatized Benefit
Coverage Gaps: Access to Medically Necessary Drugs Is Not Guaranteed.
Drug plans save money by reducing drug costs and limiting access to drugs, not by improving health.
Formularies (lists of covered drugs) vary widely and are subject to change, making it hard for prescribing doctors to comply – and ultimately harming patients.
Formulary exclusions and restrictions interrupt patients' drug regimens, reduce compliance and can result in patients taking less effective drugs.
Enrollees often need to appeal for exceptions to coverage, a cumbersome process that is often obstructed by private drug plans themselves.
Data:
Drug Plans save money by reducing drug costs and limiting access to drugs, not by improving health: xxxxxxx
b. Formularies (lists of covered drugs) vary widely, making it difficult for prescribing doctors to comply: xxxxxxx
c. Formulary exclusions and restrictions interrupt patients' drug regimens, reduce compliance and can steer
patients to less effective drugs: Data indicates that patients with chronic diseases have trouble accessing needed
prescriptions because of costs or restrictions.
-According to the HIV Medicine Association and the American Academy of HIV Medicine, 73 percent of providers said patients
on Part D plans could not afford their share of drug costs, while 76 percent said Part D plans did not cover at least one of their patients’ drugs.
As a result, 75 percent of providers reported that their patients could not get their medications; 65 percent said patients missed taking antiretrovirals.
-According to the American Psychiatric Institute for Research, 53.4 percent of psychiatrists studied said their patients with Medicare and Medicaid
had problems getting their medications from their new Part D plans. One in four patients stopped taking their medication as a result of a problem
obtaining medications under their new Part D plans.
d. Enrollees generally need lawyers to appeal for exceptions to coverage: A September 2006 Kaiser Family Foundation survey of doctors with
patients in Part D plans found that half reported they had been asked for help in an appeal for coverage. Two-thirds of doctors said it was a
burden helping patients obtain coverage for a drug under Part D.

8. Problems with the Privatized Benefit
Instability:
Plans can change formularies, cost sharing and premiums throughout the year.
Every year the coverage gap widens.
Drug prices go up all the time.
Low-income people with Medicare are randomly reassigned to different plans every year (1.15 million reassigned in 2008).
Data:
Plans can change formularies, cost sharing and premiums every year, and during the year: According to the Kaiser Family Foundation,
the 10 most popular Part D plans changed restrictions for the 152 most commonly used drugs from 2006 to Nine of the 10 plans added new
quantity limits, while step therapy requirements increased in four of the 10 plans.
-A 2007 Consumers Union report found that nearly all Part D plans raised their drug prices from January to February,
after enrollees were locked into the plan for the year. A quarter of plans raised prices by more than 5 percent.
The report found plans changed prices multiple times during the course of the year, and almost always raised prices from one year to the next.
b. Every year the coverage gap widens: The Coverage Gap went from $3,600 in 2006 to $3,850 in 2007, and to $4,050 in 2008.
It is expected to go up to $xxxx in 200x. While Humana PDP Complete was the only plan to offer coverage through the doughnut hole
for both generic and brand-name drugs in 2006, it dropped doughnut hole coverage in Currently, there is only one plan –
Citrus Part D in Florida – that offers some brand-name coverage through the doughnut hole.
c. Drug prices go up all the time: According to AARP, over the past two years, the prices of brand-name drugs most
used by older adults rose by 12 percent.
d. Low-income people with Medicare are randomly reassigned to different plans every year: In 2006, CMS randomly assigned
5.5 million dual eligibles (people with Medicare and Medicaid) to qualifying Part D plans. The Health and Human Services’ Office
of Inspector General Found that 30 percent of randomly assigned dual eligibles (1.6 million people) were assigned to plans that
covered less than 85 percent of the 178 commonly used drugs.

9. Problems with the Privatized Benefit
Consumer Confusion and Marketing Fraud
Every Part D enrollee is a marketing lead for insurers selling private Medicare health plans.
A confusing and unstable benefit makes consumers – particularly limited English speakers or those with dementia or cognitive impairments – vulnerable to abusive and deceptive marketing.
Consumers do not have the option of enrolling in a standardized benefit.
A confusing and unstable benefit makes consumers vulnerable to abusive and deceptive marketing:
People with Medicare are normally expected to use the internet to compare their drug plan choices.
However, according to the Kaiser Family Foundation, only 31 percent of Americans over 65 have ever gone online.
Many plans fail to send out notices of year-to-year changes to their coverage and most change coverage within the enrollment year
(after lock-in).

10. Proposed Solution: Part D Under Original Medicare
S.2219/H.R. 3932: Medicare Prescription Drug Savings and Choice Act of 2007.
The bill creates public option to compete in Part D marketplace and would:
Improve Access to Necessary Drugs. The formulary (list of covered drugs) would be based on clinical evidence and provide a channel for consumer friendly appeals.
Lower Prices. Medicare would use broad leverage to negotiate lower drug prices with pharmaceutical companies.
Stabilize Coverage. With a stable year-to-year choice, consumers could stick to the public option for years without seeing their benefit change.
Eliminate (Reduce?) the Coverage Gap
Data:
Improve Access to Necessary Drugs: MRC believes that an advisory committee established by CMS
(whose members are free of ties to pharmaceutical manufacturers and insurance companies) should be empowered
to evaluate clinical evidence for formulary development. Currently, the Veterans Administration has an evidence-based
formulary covering 4,778 drugs (Part D plans can potentially cover only 4,300), and provides nonformulary coverage on evidence-based guidelines.
b. Lower prices: Evidence-based formularies can save money. The Veterans’ Administration’s evidence-driven formulary allowed
the average price per prescription to decline over the past two years (while drug prices have risen by 12 percent),
mainly because of price negotiations and increased generic utilization.
d. According to Dean Baker of the Center for Economic and Policy Research, “If Medicare had been allowed to bargain
directly with the pharmaceutical industry… the savings would be more than twice the size of the doughnut hole. This
would allow for the elimination of the doughnut hole, in addition to substantial savings for the federal and state governments.

11. Passage as part of Comprehensive Health Reform in 2009
Medicare reforms must be part of the comprehensive health reform.
The Public Option under Democratic health proposals is modelled on Medicare. The model needs fixing: Medicare must become an integrated benefit (including drug coverage).