At the New England Journal of Medicine, Drs. Stacie Dusetzina, Nancy, Keating and Haiden Huskamp review several of the possible redesigns for Medicare Part D. Right now Medicare Part D is not truly insurance. It is a payment assistance program that has insurance like features for broad segments of the population but there is ongoing catastrophic exposure. This catastrophic, open ended exposure is becoming more and more important as ultra-high price drugs are becoming more common and more broadly prescribed.
Right now, Medicare Part D has a deductible, then a region of spending where there is a 25% coinsurance paid by the patient, and after that first co-insurance level, a smaller, but never capped 5% coinsurance paid by the patient. For most people, this is not too relevant as they are not taking $100,000 or more year drugs. But for the folks who are on $100,000 to $500,000 year drugs and more importantly are on them for the rest of their lives, it is a significant failure of insurance as it is not protection against a tail risk, but protection against a mid point of the distribution.
There are three proposals to provide some catastrophic protection. These proposals all have trade-offs. If we are holding actuarial value constant and providing a catastrophic limit to the few people with very expensive claims, then the money has to come from somewhere. And that somewhere is from people who have lower levels of claims or the entire covered population.
Holding lower claim spending benefits constant means higher premiums or a new infusion of federal money.
Medicare as it is currently constructed is a weird set of choices that have their roots in either the 1964 Blue Cross and Blue Shield business model or jello wrestling between Capital Hill and the Congressional Budget Office to get a good enough score. Without supplements, Medicare is not true protection against catastrophic claims. It is usually good enough for most enough, but not good enough for the most unusual. Medicare Part D just shows this even more bluntly than it is evident in the hospital component of Medicare.
Capital HillCapitol Hill.
Yup. It needs to be redesigned and more money needs to come from those who have most of it.
Until Medicare is allowed to negotiate drug prices like the rest of the insurance community, Part D will remain as it is now, an insurance illusion whose primary goal is maximizing profits for pharmaceutical companies.
Part D is better than no coverage, but has a long way to go before delivering on it’s full promise.
Totally ignorant question: is this true even in an an advantage plan?
Another uninformed question: isn’t this the handiwork of Bush #2?
I think there may be a third “root” of the original Part D benefit structure. The politics of passing the bill. Most of the benefit of the bill goes to middle class voters with mid-level claims experience. Something for everyone! At the catastrophic level, low and middle income voters will reach Medicaid somewhat later than they might have.
For high income individuals, Part D coverage for claims below the catastrophic level is of little consequences. But these are the only people who can afford to self-pay at that that level, and 95% discounts for ultra-high priced drugs was a real selling point.
Over all, the original benefit structure offered relatively little value for the poor, better than nothing value to attract the middle, and a boon to well-off. Kind of like the Bush Republican tax cut plan.
The Part D benefit design has Bush #2 tax cut thinking in its DNA.
The third “root” of the benefit design was collecting support for its passage. The middle class get a “better than nothing” benefit to meet mid-level drug spending, but are facing real hardship in the coverage gap, even before they hit the catastrophic level. High income individuals, the only people who can comfortably meet net drug costs all the way through the coverage gap, get a whopping 95% discount on ultra-high cost drugs.
Or, you know, drug prices could be lower.
I’m retired. I dislike my drug plan because it does not cover drugs that are prescribed for me. My endrocrinologist prescribed a new drug that would treat my thyroid issue better than the usual drug prescribed for me. But it is not covered by my insurance and costs approximately $350 a month. GoodRX does not provide a discount for the drug. While the drug is not life-saving and does not cost the outrageous amounts for some drugs, I would prefer a plan that covers more drugs. A friend of mine does have a life-threatening condition and her life-saving drug costs $8,000 a month. Although she has worked something with the drug company so that she can get the drug, she is very assertive and intelligent; I doubt that most people would have the energy skills to negotiate.
The long tail problem with Medicare Part D illustrates, indirectly, why arguments over whether people do or do not love their private health care insurance are silly. Since most people make little, or even no, use of health care, let alone insurance, over the course of a year, it’s existence is just a matter of reassurance.
And as for how it gets paid for, that, too, has a certain level of unreality for those who get it through employment. As long as there’s no reduction in take-home pay, it all feels like Monopoly money.
When I had a hip replacement surgery in 2010, the hospital and orthopedic surgeon bill came to $75,000, but my health insurance said, “No, we’ll give you $15,000, and I would be responsible for a $500 co-pay to the orthopedic surgeon.”
Effectively, the surgery cost me $500, and all those other numbers were just numbers.
I’m 63 and have begun looking at Medicare plans. From what I see so far my Obamacare plan is around $2000 a year cheaper than a comparable Medicare advantage plan. Straight Medicare has no out of pocket limits which is unacceptable, although the most docs are in network aspect is nice. I haven’t priced the supplement plans. I’d rather keep my $3 a month Bronze HSA Obamacare.
@Kelly: What you need to focus on is the total out of pocket costs in the plan finder tool that Medicare has.
The Doughnut hole sucks. Period.
I agree with Karen the doughnut hold sucks.
And why can’t you get help from the drug companies just because you have Medicare , but they can put in the doughnut hole and put you on a drug with more side effects and have to take it more often.
Ask for the “cash” price. Pharmacists now have to tell you. It is sometimes less than the copay.
My husband has. Diabetes and the doctor put him on invokana and ozempia and they were helping until they got too high and we couldn’t afford them because of the coverage gap and we can’t get any help anywhere that is so sad we are on social security and have humans advantage
@Gary Ratner: Thank you Gary for including the Gap as a hardship for low & middle incomes, not to mention those of us who are retired, elderly, and on a fixed income. To add to the hardship, consider those same retirees, among others, who need to take a controlled Rx which most Part D companies will not cover.