Last month's deadline for seniors to sign up for the new Medicare Part D prescription drug benefit is the latest milestone in an ongoing national discussion about the value of this new benefit, the most important expansion of Medicare since the program was created in 1965. With Part D, Medicare's benefits include some of the most effective tools modern medicine has to offer. Many vulnerable Medicare beneficiaries who otherwise might not have access to prescription drugs now should be able to more easily obtain the medications they need.
But in the debate over beneficiary sign-up rates and reported confusion about the enrollment process, it was easy to overlook a number of critical questions about the benefit's long-term value. We can now focus on the question of whether enrollees will be better off with Part D than they were before. Some of the issues that need to be resolved are:
- Is Part D using public dollars efficiently?
- Does the benefit adequately meet the needs of Medicare beneficiaries?
- Are all low-income beneficiaries adequately protected?
One barrier to evaluating the benefit is the lack of data. To date, we do not know how much of the public funds being spent on Part D are devoted to administrative costs. Likewise, the program's impact on drug prices is unknown. Nor do we know how much of Medicare outlays are allocated to prescription drugs, instead of the other provisions in the Medicare Modernization Act such as higher payments to managed care plans, incentive payments to employers, and subsidies for health savings accounts.
Many questions also remain about the quality of the benefit. It's likely that this summer and fall, many beneficiaries will hit a no-coverage gap known as the "doughnut hole." Many enrollees, after reaching prescription drug costs of $2,250, will enter the "doughnut hole," paying all drug costs out of pocket until they reach a catastrophic limit of $5,100.
Fund grantee Bruce Stuart, executive director of the Peter Lamy Center on Drug Therapy and Aging, estimates within the first year of the benefit, 38 percent of enrollees will be subject to the "doughnut hole," and 14 percent will exceed the threshold of catastrophic coverage. Virtually nothing is known yet about the financial burdens on those with substantial medication costs.
Studies also show that high drug costs will affect the health and well-being of beneficiaries. For example, a national survey published by the Fund last year showed that four of 10 seniors did not take all the drugs prescribed to them by doctors in the past year due, in part, to cost.
Knowing more about how low-income Medicare beneficiaries are faring is particularly critical. Data on enrollment for subsidies, and the reasons many fail to enroll or qualify, are essential. It is also important to understand the experience of near-poor elderly just above the threshold for "extra help."
Additionally, the outpatient prescription drug benefit fragments coverage for many beneficiaries. Those wishing to remain in Medicare's traditional fee-for-service program now require three separate plans to secure comprehensive coverage: Medicare for basic hospital and physician services, a private drug plan for prescription drugs, and supplemental Medigap private insurance to help pay high out-of-pocket expenses and protect against catastrophic hospital and physician service costs.
So how can we improve Part D? Automatic enrollment might be the first step, to guarantee that no potential enrollee is left behind. Enrollment among vulnerable low-income Medicare beneficiaries, such as those in nursing homes, is particularly low although how low remains unknown.
Another option would be to offer beneficiaries a comprehensive benefit option that eliminates the need to purchase private drug plans or Medigap supplemental coverage. This proposal is outlined in the October 2005 Health Affairs article, "Medicare Extra: A Comprehensive Benefits Option for Medicare Beneficiaries," that I wrote along with Marilyn Moon of the American Institutes for Research, and other colleagues.
The Medicare Modernization Act represents the largest expansion of benefits in the program's history. Now it is time to make sure that everyone eligible has access to these benefits—and ensure that the benefit provides efficient, high-quality coverage.
As always, I'd like to hear from you. Send your feedback to [email protected].
See the chartpack attached at right for a presentation on Medicare Part D by Stuart Guterman, Ph.D., director of the Fund's Program on Medicare's Future.
Written with the assistance of Christine Haran, web editor.