Medicare Drug Insurance

Since United Health Care dropped GA 23111 D effective January 1, 2006, railroad retirees previously covered by the plan have been forced to join the masses in wading through the overwhelming and confusing world of Medicare Drug Coverage. You still have until May 15^th to make your selection of plans, and my sympathies go out to you in the meantime. So far, the plan has had less than austere beginnings, leaving even some who took the initiative and enrolled early, without coverage. Even more perplexing than wading through the mountains of information is the lack of availability of one-on-one counseling for those who do not have internet access or doctorate degree.

When we first reported on the Medicare bill, I do not recall having much of anything nice to say about it. I really hate being right sometimes. The problem is if you do not do extensive, time consuming research, you may end up paying more than you need to. I would refer you to the Senior Citizens League (TSCL) website at www.tscl.org, which offers tips and tricks for wading through the mud. You can also sign up for their email updates, which keeps you abreast of topics of concern involving Social Security and Medicare.

A recent posting on their website outlined two pieces of legislation addressing some of the problems. H.R. 4737 would provide health insurance guidance and counseling programs to seniors during the enrollment period. The other H.R. 4660 (REPAIR Act) addresses the problems of dual-eligible seniors, while offering a period of emergency prescription drugs until such time as the new program stabilizes. TSCL is also campaigning for an extension to the current deadline to take into consideration the many problems that were encountered when the program launched on January 1^st.

While lawmakers have been reluctant to completely overhaul the drug plan, they are looking at ways to try to simplify it by reducing the number of plans available. Insurance companies are being given subsidies to encourage participation, which is obviously not a problem, so those need to cease, and employers are also being given subsidies (corporate welfare) to continue their own drug coverages, however, not the case with the railroads.

Prescription Drug Plan - Part D

(Summer 2006 Legislative Update)

Aside from the fact that figuring out which plan might be right for you requires doctorial degrees in astrophysics and economics, the drug plan marches on. At least one change is addressing one of the plan’s flaws. Under the law, beneficiaries could only change providers once per year; however, those providers were under no obligation to maintain the same list of offered medications and could change them at any time. A new protection has been announced for plan beneficiaries. Drug providers can still change their list of offered medications, but must exempt enrolled beneficiaries for the remainder of the drug plan year. In addition, Congress passed a budget resolution (read toothless) to extend Part D initial enrollment without penalty, and to give the government the power to negotiate prices with drug companies. However, no real action has been taken on this resolution, and with prices already rising nearly 4% in the first quarter of 2006, action should be taken soon if politicians wish to avoid the wrath of angry senior voters.

The "doughnut hole," the period when a gap in coverage occurs between the initial $2,500 and $5,100 in drug spending, was expected to be problematic. The problems are living up to our expectations with as many as 38% of beneficiaries expected to reach it by late summer or early fall. When that happens, beneficiaries are required to pay 100% of the costs of their prescriptions, making the benefits received prior to the doughnut hole not as rosy. The plan continues to be a bad one in spite of the millions being spent to convince seniors how great it is. Congress needs to fix the drug plan allowing more of the benefits to be realized by the consumers, rather than the drug companies.

From the Summer 2004 Newsletter Cover Story

Medicare Reform

If the measure of a good compromise is the number of different parties it disappoints, then the new bill on Medicare reform would seem to be a smashing success. Jonathan Cohn

NOTE: Because every individual retiree faces different situations, circumstances, and takes different medications, it is up to the individual to determine which is the best course of action in dealing with the new options and policies under Medicare Reform. This article is for information purposes only.

As promised in the last Newsletter, below is a “brief” overview of the reforms made to Medicare, including the Prescription Drug Plan, as signed into law December 8, 2003. I say “brief” because there is nothing “brief” about the 600 pages of this bill. I will, however, try my best to shed some light on this complicated issue. One thing railroad retirees should keep in mind when listening to the news or reading information is that railroaders receiving railroad retirement, who are in the Federal Medicare program, participate on the same basis as those under the social security system. I will set forth the explanations, followed by commentary from various sources as to whether the provision is better for Medicare recipients, or worse, and why. I will also provide a time line that has been put out regarding implementation of the various changes.

Information provided by the Centers for Medicare & Medicaid Services (CMS) and distributed by the Railroad Retirement Board in January, sets forth the major changes and how they will affect railroad retirees. As a reminder, the CMS urges recipients to read everything received from that agency. In addition, the Kaiser Family Foundation in Washington, D.C. has advised that “there is no reason to panic,” since no decisions need to be made right away, however, seniors really need to educate themselves on this tremendously complicated, and whole new way of engaging with Medicare. The consequences of a bad decision could be significant.

The best advice right now is to start tracking spending by keeping a log of doctor’s appointments, diagnostic tests, and prescription drugs and costs. Armed with this information, more informed decisions can be made in choosing the plan best suited for each individual.

1. Medicare Parts A and B. There are no significant changes to Medicare hospital coverage (Part A) or outpatient services (Part B). Registration for Part A is automatic for those receiving Social Security, but Part B must be elected. If beneficiaries sign up past the deadline, penalties can be charged. The cost for Part B for most seniors in 2004 is $66.60 per month, and the co-payments and deductibles remain in place. Beginning in 2007, the premium will increase for individuals with annual incomes of $80,000 ($160,000 for couples), and will be calculated on a sliding scale. Premium calculations will continue to be announced at the end of each calendar year.

According to the Kaiser Family Foundation, traditional Medicare only covers 56% of seniors total health-care expenditures. The hope is that the new Part D drug prescription plan will ease some of the financial burdens, but the jury is still out on this.

2. Medicare Prescription Discount Cards. Because the actual prescription drug benefit will not begin until January, 2006, a transitional program of Medicare approved prescription drug discount cards has been instituted. Enrollment for the cards begins June 1, 2004, and lasts through December 31, 2005, and once a card is selected, holders must remain with that card until an open enrollment period is announced. The cards are offered by private sector sponsors who meet standards set by CMS, and will display a Medicare approved mark. There is a maximum $30 annual enrollment fee (even for the initial half-year), with negotiated prices on certain drugs at “alleged” discounts ranging from 10 to 25%. This is not a benefit, it is a negotiated rate by the company offering the cards. Medicare requires that each approved card offer discounts on at least one drug per category in 209 classes of drugs. Ways to determine which drugs are covered, and amount of discounts can be done by contacting the individual card offerers, calling 1-800-MEDICARE, or accessing the Medicare website at www.medicare.gov.

The down-side to the drug cards is that sponsors can change prices and list of drugs covered weekly. So, even after researching which of the 73 choices is best for the types and brands of medication you take on a recurring basis, those covered drugs and prices could change without notice. Depending on your circumstance, discount cards such as those offered by pharmaceutical companies, individual pharmacies or organizations such as AARP, may provide better benefits and more reliability than the Medicare approved cards. The non-Medicare cards can be used in addition to the Medicare approved discount drug card, but only one Medicare approved drug card can be used at a time. The provision to make it legal to re-import drugs from Canada was removed from the final law, but legislation has already been filed to legalize re-importation with Federal oversight.

I spoke with a pharmacist, after the cards went into effect, and was advised that in addition to the enrollment fees, there is a processing charge of between $.50 and $1.20 per prescription. In all of the materials I have read, there was never a mention of processing fees. The pharmacist gave me an example of someone whose medications had previously cost them approximately $79, but with the new card, those same prescriptions cost $90 plus.

The real beneficiaries of the interim discount drug card, are those whose income is less that 135% of the Federal poverty level ($12,124 single or $16,363 married), but who do not receive drug coverage through Medicaid, group or individual health plans, TRI-CARE, or Federal employees’ health benefits . Those qualifying, receive subsidies of $600 per year drug coverage and the enrollment fees are waived. In talking with the same pharmacist, I was advised that cards provided by pharmaceutical companies for low income Medicare recipients may be a better deal because the medications are more heavily discounted compared with the cost after the initial $600 subsidy was expended. She was unsure, and the Medicare representative could not advise, as to whether those cards would be around much longer.

When applying for the card, beneficiaries must submit basic information about Medicare status. Unless applying for the $600 credit, income information about retirement and benefits is not required.

IF YOU ARE CURRENTLY COVERED BY A MEDICARE SUPPLEMENTAL POLICY THAT INCLUDES DRUG COVERAGE, investigate thoroughly whether the discount card will benefit you prior to enrolling in any discount card program. The option is still yours.

3. Medicare Prescription Drug Benefit. Beginning in 2006, all Medicare beneficiaries will have access to prescription drug plans administered by private companies on a regional basis (known as Medicare Part D), or they may join a preferred provider organization (HMO, PPO, or other comprehensive plan that provides all of their health care, including drugs). Initially, there will be a 7-month enrollment season for seniors beginning May 1, 2005, and ending November 30, 2005.

The estimated premium for Part D is $35, with a $250 deductible. Once the deductible is met, Medicare will pay 75% of the drug costs up to $2,250. Seniors are responsible for 100% of the next $2,850, but when total expenses reach $5,100, the catastrophic coverage kicks in and Medicare then pays 95% of drug expenditures. However, only deductibles and co-pays towards drugs on the plan’s list of covered drugs (the same principal as with the drug discount cards) count toward the out-of-pocket limit. This means that if you have prescribed medication, but that medication does not appear on your plans list, then none of the monies expended for non-covered drug will count toward filling the “doughnut hole,” the gap between $2,250 and $5,100. Because of this gap and the qualifiers, the drug benefit is not as generous as some would have liked.

Greater benefits are again realized by low income seniors. Individuals with incomes below 100% of the poverty level that are dually eligible for Medicare and full Medicaid benefits, will pay no premium or deductible and have no gap in coverage. They pay $1 co-pay for generic drugs and $3 co-pay for brand name drugs. After $3,600 out of pocket is met, the is no co-pay. For those dually eligible seniors below the 135% poverty level threshold, the same applies, but with a co-pay for generic drugs of $2, and $5 for brand names. Those who are below the 135% poverty level, but not eligible for Medicaid receive the same benefits for the dually eligible, but must satisfy an asset test of $6,000 for individuals ($9,000 married). Individuals whose income is below 150% of the federal poverty level who are not eligible under other low-income categories must satisfy an asset test of $10,000 individual ($20,000/couple). Premiums range from $0 to $420, with a $50 deductible and no gap in coverage. They pay a 15% co-pay for covered drugs up to $3,600. After that, the co-pay is $2 for generic and $5 brand name, however, co-pays are indexed to increases in price of Part D covered drugs.

The new health plans are expected to differ in premiums and co-pays, coverage, and covered drugs. Unlike current Medigap insurance policies, there is no requirement for standardized benefits that would allow seniors to compare similar plans based on price. Beneficiaries who purchase Part D will be prohibited from purchasing supplemental insurance policies that include prescription drug benefits, forcing seniors to choose between supplemental Medigap policies that provide prescription drug coverage, and the new Part D.

A provision, removed from the original bill, would have given carte blanche to employers to do away with retiree insurance coverage by removing any penalties under age discrimination laws. In exchange for removing that provision, Congress has allocated $86 billion in payments and tax advantages over the next 10 years to employers who continue to provide drug coverage to retired workers.

4. Medigap Plans. Under the new law, beneficiaries who currently have Medigap prescription drug plans will be guaranteed issuance of Medigap plans A, B C, or F, with no waiting period for coverage of pre-existing conditions and no medical underwriting if they enroll in a Part D plan during the initial enrollment period, and enroll in the new Medicap policy within 63 days of the effective date of the Part D coverage.

The government plans to offer two new supplemental policies. The first one will cover 50% of the Part A and B cost sharing, hospital in-patient coinsurance and long-term hospital stays, and will provide an annual out of pocket limit on cost sharing of $4,000 in 2006. The second package is similar covering 75% of cost-sharing, and has a $2,000 annual out-of-pocket limit. Insurers have yet to set premiums for these two new policies. Under the reform, new beneficiaries will not be able to purchase a Medigap plan that includes drug coverage because the government prefers you to purchase Part D. If you already have a Medigap Plan with drug coverage, (Parts H, I and J), you will be grandfathered and able to keep it as long as you like.

Here’s the rub on keeping your current Medigap insurance. If premiums go so high that you later decide to cancel and switch to the new Medigap insurance and Part D, lawmakers included a penalty for each month spent out of the plan, or without credible coverage (Medicaid, Group Health Plans, State Pharmaceutical Assistance Programs, Veterans’ Coverage, and Military Coverage - Medigap drug benefits may or may not be considered credible coverage). The amount of that penalty, however, is still pretty fuzzy, but could be 1% of the base beneficiary premium, or some complex formula only a government bean counter could have come up with.

5. Medicare Advantage. Because Medigap policies can be very expensive, an option has been written in for comprehensive coverage through a Medicare Advantage plan, formerly known as Medicare + Choice. This new plan, run by private insurance companies contracted by Medicare, offers more choice through regional preferred provider organizations (PPO’s) allowing beneficiaries to use doctors, hospitals and providers belonging to a network. Smart Money.com suggests thinking of the new plan as “the next generation in Medicare HMO’s.” These policies include a drug benefit and allow seniors more freedom to choose a doctor. Using network providers allows beneficiaries to save money, but one advantage is no referral is required in order to see a specialist. According to Smart Money.com, insurers are still working out the details of these plans. Critics, however, are reminding lawmakers that when Medicare managed care programs began, they were touted as a means of saving money for the Medicare Program, but as a former Medicare administrator pointed out, managed care plans have “not saved Medicare a nickel.” Also, insurance companies can withdraw coverage if they do not feel their profit margins are what they should be, which is why $14.2 billion in payments to these insurance companies was included to encourage participation.

6. Improved Benefits. Beginning in 2005, Medicare preventative benefit coverage will expand to include: a one-time preventative physical exam within 6 months of when a person enrolls in Medicare Part B; screening blood tests for early detection of cardiovascular diseases; and diabetes screening tests for people at risk of diabetes.

CMS should have mailed letters to all Medicare beneficiaries this Spring, explaining the prescription drug discount cards. In 2005, CMS plans to mail informational booklets to beneficiaries to explain the prescription drug benefit.

Comments. Despite its complexity, this bill does not truly address the needs of Seniors, and it is not the answer to Medicare’s financial woes. This bill actually makes Medicare less efficient and undermines its long-term financial stability. Some proponents of the reform justify their positions arguing that the private sector can adapt to changing medical technology and public health data faster than bureaucracy, when in fact, Medicare incorporates new treatments fairly quickly, and the private sector often follows Medicare’s lead, not the other way around.

The non-partisan Medicare Payment Advisory Commission determined that for every beneficiary that enrolls in a private plan today, the government already pays 119% of what it would have paid for that person’s benefits under traditional Medicare. The new bill increases that rate to 130% effectually making Medicare spend more on less efficient coverage.

As you know, the bill passed last year and opposed by most senior groups, was drafted by a heavily partisan committee behind closed doors. The underlying political motivation and reasons for its “arm twisting” passage, amounts to a slap in the face for seniors who need real relief from escalating medical and prescription drug costs. There are a number of provisions that need to be changed, and even though several bills to do just that have been filed this session, it is unlikely that anything will be passed prior to the November elections. These proposals would allow importation of drugs from Canada, eliminate tax breaks for health savings accounts, fill in the “doughnut hole,” reduce payments to private plans, and abolish a demonstration project set for 2010, which would require Medicare to compete directly with private plans. Look for the new Congress to readdress the flaws contained in this bill and bring to seniors the type of health coverage they deserve in a form that will not break the Medicare “bank.”

Matthew Yglesias warns that the powers that be have transformed Medicare into a “pork barrel project for GOP donors. It’s bad for the budget, bad for seniors, but great for corporate profit margins,” because corporations are being subsidized for a contractual obligation they already had. This bill constitutes nothing more than blatant corporate welfare.

Opponents of the bill have charged that the new law funnels too much money to insurers and drug companies and not enough to patients. The enormous strain the bill puts on the deficit is an issue that should not be overlooked, in fact, it reeks of fiscal recklessness. The initial estimate for the cost of the bill was $395 billion, but within a month was increased an additional $135 billion (that omission is currently under investigation). The 20-year cost could reach as high as $2 trillion according to the Congressional Budget Office.

This article does not include all of the provisions contained in the new law, only the ones I felt affected our members the most. I hope this helps at least a little in developing an understanding of the very complex decisions that will need to be made with implementation of Medicare reform. Remember to make your decisions carefully, and for now, stay away from insurance companies trying to sell you a Medicare or health plan now. Scam artists are everywhere trying to take advantage of Medicare recipients and their confusion.

Below is a list of websites and numbers to use to gather information to help in the difficult decisions that lie ahead.

Medicare 1-800-633-4227