How Medicare Beneficiaries Pay for Prescription Drugs

How can the mainstay of our healthcare system for older people not provide drug benefits? our Medicare doesn't cover prescription To many new beneficiaries this revelation comes as a rude surprise. How can the mainstay of our healthcare system for older people not provide drug benefits? After the shock subsides, the search begins for coverage under other auspices. Few are prepared for the complexity of this process. There are a bewildering number of plans that pay for drugs on behalf of Medicare beneficiaries. All these plans are limited in terms of eligibility and benefit structure, and in many, the true value of the drug benefit is not evident until after the individual signs up and attempts to use the coverage. To make matters worse, drug coverage provisions change fire-- quently, premium costs are rising rapidly, and some plans are dropping drug benefits altogether. This paper attempts to put such concerns into perspective with an overview of the drug coverage available, an evaluation of the benefits provided, recent data showing which plans elders tend to select and how long they keep them, and a discussion of options for a Medicare drug benefit. THE SEARCH FOR DRUG COVERAGE In 1998, the Medicare program spent $217 billion on health services for 39 million beneficiaries, 88 percent of whom were aged 65 or older (Braden et al.,1998). This figure represents almost 20 percent of the entire amount spent on health services for the whole U.S. population that year. Yet, Medicare coverage ofhealth services is limited in significant ways. The gaps in Medicare coverage have spawned an industry of supplemental policies and programs. Some nine of every ten Medicare beneficiaries have some form of supplemental coverage, at least some ofthe time. Because Medicare does not provide outpatient prescription coverage, beneficiaries who wish it must either choose to move out of traditional Medicare into a Medicare +Choice plan or must supplement basic Medicare with a public or private supplemental plan. Medicare+ Choice is the name for Medicare Hmos created by the Balanced Budget Act of 1997. Sixty-nine percent of Medicare beneficiaries live in areas served by one or more such plans, and about 6.2 million are currently enrolled (MedpAc, 2000). According to Medicare beneficiaries themselves, the main reason they sign up is to obtain drug coverage (Langwell et al.,1999). Until 2000, most Medicare +Choice plans offered modest drug benefits with low copayments and annual benefit caps in the range of $750 to $2,000 (Gold et al.,1999). The typical plan offered these benefits at a zero premium. That is, enrollees paid only the Part B premium and nothing extra to the HMO (Medicare consists of two parts: Part A, hospital insurance, and Part B, optional insurance that covers physicians' services and outpatient care, in part, for a monthly premium paid for by beneficiaries). Recently, however, the market has changed dramatically Faced with rapidly escalating drug costs and limited Medicare + Choice capitation fees paid by the government, most plans have sliced their drug benefits and raised premiums. Today, the typical plan has an annual drug benefit cap of under $i,ooo and imposes high copayments and other restrictions. In some cases, the coverage is virtually worthless, as witness this current offering from a plan in New York state: Prescription drugs are covered with limits. You pay 50 percent per generic prescription. YOU pay 50 percent per brand-name prescription. Your generic and brandname prescription drugs are covered up to $200 per year. You must use plan-approved prescription drugs. There is a quarterly limit for prescription drugs. (Medicare Compare, 2000) Or consider this offer to Medicare beneficiaries in Maryland: Prescription drugs are covered with limits. You pay $9 per generic prescription. You pay $45 per brandname prescription. Your generic and brand-name prescription drugs are covered up to $300 per year. …