Running Head The Medicare Doughnut Hole Essay Example

Running Head: The Medicare Doughnut Hole Paper Medicare, the nations largest health insurance program, covers nearly 40 million Americans. Medicare part D, a federal program to subsidize the costs of prescription drugs for Medicare beneficiaries in the United States, was enacted as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 and went into effect on January 1, 2006. Medicare Part D benefits are administered by private insurance plans that are reimbursed by the Centers for Medicare and Medicaid Services. Beneficiaries can obtain the Medicare Drug benefit through two types of private plans: a. Prescription Drug Plan (PDP) for drug coverage only or they can join a Medicare Advantage plan (MA) that covers both medical services and prescription drugs. The standard benefit for Medicare part D is defined in terms of the benefit structure and not in terms of the drugs that must be covered. This standard benefit requires payment of a $265 deductible and the beneficiary then pays 25% of the cost of a covered part D prescription drug up to an initial coverage limit of $2,400. We will write a custom essay sample on Running Head: The Medicare Doughnut Hole specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Running Head: The Medicare Doughnut Hole specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Running Head: The Medicare Doughnut Hole specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Once the initial coverage limit is reached, the beneficiary is subject to another deductible, known officially as the Coverage Gap but referred to more commonly as the Donut Hole, in which they must pay the full cost of medicine. Health economists rationalize this gap, the Donut Hole, as a political compromise in which the optimal policy for the non-poor is stop-loss in which benefit payments would only start after an insured suffers the stop-loss limit of $3,000-$5,000, after which the insurance covers 100% of the cost. For the needy who cannot absorb the total $3000 to $5000 stop-loss limit, supporters argue that plan should have a much lower (even zero dollar) limit. In those cases, the all needed drugs would be provided free as this approach forces a disproportionate burden upon senior citizens and patients with chronic illness (Lee, 2006). Medicare part D has had success, but has also faced daunting challenges. Researchers now have a chance to learn from experience to date and to strengthen the program, particularly as it affects the frailest, sickest, and most vulnerable beneficiaries, including nursing home residents. Senior citizens are the most overmedicated group of people in the world. Their lives and drugs are so intertwined that it is difficult to evaluate the justification for the enactment of Medicare Part D. The course of life is changed by dependence on drugs and quality of life is lowered when unnecessary drugs are taken. Unfortunately, this situation often occurs and Part D will aggravate the problem. This paper hypothesizes that continuing research on the effects of Medicare Part D will help improve the program and aid it into serving the US citizens more effectively. The criteria for choice of articles to include in the scope of this paper were (a) accessibility, (b) frequently quoted in other referenced sources, and (c) applicability to problem statement and hypothesis. The purpose of this paper is to review and synthesize the research from articles, using the framework of the problem statement: How does Medicare Part D affect the healthcare of senior citizens? Is Medicare Part D a form of Elder Abuse or Welfare? The complexity of the Medicare Part D program poses particular challenges for dual eligible beneficiaries, Medicare beneficiaries who also quality for Medicaid benefits. These beneficiaries, most of whom previously had received drug coverage through Medicaid, were switched to Medicare coverage under part D and auto-assigned to eligible plans. Attorney Judith Stein, head of the Center for Medicare Advocacy, says the problems are structural because Part D involves dozens of different private plans. Insurers impose quantity limits, step therapy and other hidden restrictions on drugs and their prices. The law provides that providers can determine which drugs their programs cover and which they do not. Senior citizens must then pick and choose which program to sign up for based on whether the drugs they are currently using are covered by the plan they choose. Plans differ from each other in design, in costs of premiums, deductibles, and coinsurance or co-payments, in formulary composition, and in the process of obtaining coverage for drugs not included in the formulary. In addition, Medicare Part D plans have broad discretion, within certain statutorily prescribed parameters, to decide which drugs to include in their formularies, the strengths and dosage forms of covered drugs to include, and the types of utilization management processes used to control drug costs and usages (Wessel, 2006). This provision makes choosing a program a confusing nightmare as the senior citizen is not able to compare programs as if they are choosing apples from a basket. When a person is choosing a Medicare Part D plan, the choice may be which basket among other baskets of apples will be best to have or not have. Not only does this make for a confusing array of choices for a senior citizen, this provision of the law presupposes that the drugs a person are currently taking will be constant over time. As a person’s condition changes and new drugs are introduced to the marketplace, that person’s prescriptions can and do change, thus making the previous choice of a program obsolete in a relatively short period of time (Wilson, 2006). Another problem is that it allows a provider to pick the drugs that it will cover, allowing providers to cut various deals with the drug companies to focus on the specific products it has chosen to provide. This is one of the reasons for the high cost of Medicare Part D for the taxpayer while the actual benefits provided to our senior citizens are less than what they should be. To complicate the process even more, a number of entities are involved in the administration of the Part D program. The Centers for Medicare and Medicaid Services (CMS) administers the Medicare program and has the overall responsibility for Part D, the Social Security Administration and state Medicaid offices have primary responsibility for approving applicant for the low-income subsidy, Part D plane provide the benefits, physicians prescribe medications based on plan design, and pharmacies fill the prescriptions (Lieberman, 2006). The law also includes a component that prevented the government from negotiating directly with any of the drug companies. The problem with this approach is obvious in that Medicare Part D is destined to become one of the biggest customers of prescription drugs on the face of this earth. The entire program is paid for by taxpayers. To not allow the government to participate in negotiations on price is a serious departure from marketplace supply and demand theory because it excludes the largest customer from participating on the demand side. The lack of this ability to negotiate is a primary reason for the huge cost of this program (Wessel, 2006), which also means expensive medicines. This is an issue especially since this standard benefit requires payment of a $265 deductible and the beneficiary then pays 25% of the cost of a covered part D prescription drug up to an initial coverage limit of $2,400. Once the initial coverage limit is reached, the beneficiary is subject to another deductible, known officially as the Coverage Gap but referred to more commonly as the Donut Hole, in which they must pay the full cost of medicine (Montgomery Lee, 2006). The CMS has just announced that nearly 1. 6 million low income Medicare beneficiaries will experience a major change in their prescription drug coverage in 2008. The change highlights the instability and unpredictability that have plagued low income beneficiaries in the Medicare Part D (NSCLC, 2007). Under Medicare Part D, beneficiaries who qualify for the Low Income Subsidy (LIS), together with dual eligible beneficiaries and those who qualify for Medicaid, are automatically enrolled into plans with premiums that fall below a certain level, known as â€Å"regional benchmark. † The regional benchmark changes annually. Many plans that had premiums below the benchmark of 2007 will not be available at all or will have premiums above the benchmark in 2008. As a result, CMS has announced that it will reassign nearly 1. 6 million low income beneficiaries currently in these plans to a new plan sponsor. That new plan sponsor will likely cover different rules requesting exceptions and will have a different pharmacy network (NSCLC, 2007). In 2007, all Medicare Part D beneficiaries eligible for the LIS, also called â€Å"extra help,† have a continuous Special Enrollment Period (SEP) and are given the opportunity to switch plans as often as monthly. Previously, only full and partial dual eligible beneficiaries, who qualify for both Medicare and any type of Medicaid, were permitted to change plans at any time. All LIS eligible beneficiaries have this benefit. A continuous enrollment period has many benefits such that if a beneficiary’s plan does not cover a necessary drug, it may be easier to switch plans than to seek an exception to the plan’s formulary (Senior Journal, 2006). The intensive marketing that has characterized plan outreach, many individuals have joined plans, which they later realized are not appropriate for their needs. The continuous enrollment period makes it easier to correct such mistakes. Kevin Prindiville of the National Senior Citizens Law Center says, â€Å"There is no end to the Part D nightmare for beneficiaries. After benefiting from consistent, stable, predictable Medicaid drug coverage for years, they have been thrown onto the health insurance equivalent of a rollercoaster where their benefits change year after year. With each new coverage year, sick, vulnerable, low-income dual eligible beneficiaries face challenge of starting all over, yet again, with a whole new system of benefits. † However, according to a survey conducted by the Commonwealth Fund Health Care, leaders in the healthcare industry agree that the enactment of Part D was on balance good for beneficiaries, even of majorities also support basic changes to the law. Eighty-two percent of seniors enrolled in the Medicare Part D prescription drug benefit are satisfied with their coverage into the program, according to a new survey commissioned by the Medicare Rx Education Network and conducted by KRC Research. The findings of the nationally representative survey of 802 seniors aged 65 and older are in line with results from a similar survey conducted by KRC in mid-March, soon after the Part D benefit began. According to a survey conducted by Harris Interactive, the health care industry sector were most supportive of the law, with 95% agreeing it was good for beneficiaries, while 56% to 67% of respondents in academic/research institutions, health care delivery, or other sectors said it was good for beneficiaries. Fewer than one-third (30%) of respondents agreed that making Medicare drug coverage available only through private plans was, on balance, good for beneficiaries. About one-third (36%) agree that the current benefit structure, including a coverage gap during which most enrollees are responsible for all of their covered costs will, on balance, help beneficiaries who are most vulnerable to high drug costs. Respondents were asked about approaches to address problems with the structure and complexity of the benefit, with majorities voicing support for several proposed changes. Just 8 percent of all respondents favored leaving the deadline and penalty for late enrollment in place, although 22 percent of the business/insurance/or other health care industry sector respondents favored this option. Fifty-one percent of all respondents favor extending the enrollment deadline and removing the penalty, while 39 percent favor leaving the deadline in place, but allowing people to enroll in the program next year without penalty (39%). Three-fourths (77%) of respondents agreed that benefits should be more standardized to reduce variation among plans, and 69 percent said better information on cost-sharing and formulary structure should be provided to beneficiaries. Only 2 percent said the system should be left as it is. However, in a commentary on the survey findings, John Rother, Group Executive Officer of Policy and Strategy for AARP also says Part D has fallen short in providing generous coverage to people with limited incomes, and recommends changes such as eliminating the asset test and simplifying the application process for the low-income subsidy. Among key results, the survey shows the majority of seniors in Part D plans reported that they are getting the prescription medicines they need through their Medicare drug coverage. 73 percent said that their stand-alone plan or Medicare Advantage plan covers all the medicines prescribed by their doctor. 32 percent reported that they no longer need to skip or reduce prescribed doses now that they are enrolled in a Part D plan. 79 percent said their total out-of-pocket costs are reasonable. Specifically, they reported that monthly premiums and co-pays are affordable (81 percent and 78 percent, respectively), and the majority (61 percent) said they now spend less on medications. 69 percent in Part D plans reported that they are better off now than before they enrolled in the Medicare drug benefit. Nearly all (92 percent) said their plan is convenient to use, and 87 percent said it offers good customer service. Over 75 percent of seniors surveyed were unsure of the timing of the open-enrollment period. Three-quarters (75 percent) said they do not intend to switch plans, while just over 10 percent said they might change plans and 13 percent were unsure. Conclusion From the articles reviewed in the paper, it can be inferred that: (a) Senior citizens, being the most and frequently overmedicated people, are affected by the provision under the Medicare Part D program that provides that providers can determine which drugs their programs (plans) cover and which they do not. Senior citizens must pick and choose which program to sign up for based on whether the drugs they are currently using are covered by the plan they choose. This limits the senior citizen’s list of available medications under his chosen plan and the inherent frequent changes in elder people’s prescriptions would certainly be a problem as it presupposes that the drugs a person are currently taking will be constant over time; (b) to complicate the process even more, a number of entities are involved in the administration of the Part D program and makes the application of not only the senior citizens but also the rest of the beneficiaries complex; (c) The senior citizens, given the expensive medicines the government is not allowed to negotiate with drug companies, are affect by the standard benefit, which requires payment of a $265 deductible and the beneficiary then pays 25% of the cost of a covered part D prescription drug up to an initial coverage limit of $2,400. After the initial coverage limit is reached, the beneficiary is subject to another deductible, known officially as the Coverage Gap but referred to more commonly as the Donut Hole, in which they must pay the full cost of medicine; (d) Low income senior citizens will get extra help from the law that those who are qualified in the LIS, as well as dual eligible and Medicaid beneficiaries will be automatically enrolled into plans with premiums that fall below a certain level, known as â€Å"regional benchmark;† (e) It will be easier to have an all-available list of medications in plans but a continuous enrollment period has many benefits to aid senior citizens who frequently change prescriptions. If a beneficiary’s plan does not cover a necessary drug, it may be easier to switch plans than to seek an exception to the plan’s formulary; (f) Senior citizens think the Medicare Part D program is good but the complexity must be reduced, benefit structure must be changed, and low-income benefits must improve. The law should be rewritten to require providers to cover all FDA approved commonly prescribed medicine. Senior citizens would then be comfortable that any plan they choose would provide the drug benefits they need now and in the future. Shopping for the programs would be less confusing as the programs offered all would provide drugs that are included on the same required list. Lastly, true competition could exist and costs could come down as companies would be required to compete on a level playing field. The government should be allowed to participate in pricing negotiations with the drug companies. This will quickly bring down the cost of the entire program. Each provider would then incur the same low cost as any other provider and they will compete based on their efficiency in administering their programs versus their ability to cut deals on specific drugs with the drug companies. Medicare Part D must loose the asset limits and simplify application procedures for the Low Income Subsidy. It must also provide an intelligent, auto-assignment procedure, set an annual cap on out-of-pocket expenditures by LIS recipients, and eliminate cost sharing for dual eligible beneficiaries receiving services through a home and community based care waiver. The Medicare Part D must also make a variety of other beneficiary-friendly changes that aim at low-income senior beneficiaries. In summary, it is a good suggestion that this year should be used as a test year for the current program and its recent legislation so that a totally restructured program that fixes the current law’s flaws can be implemented on 2008 once and for all, if the current provisions of Medicare Part D are deemed a success or failure. References Harris Interactive for the Commonwealth fund. (2006). The Medicare Modernization at Mid-Year Act. Lee, C. , (2006). Group Says Gap in Medicare Drug Coverage Will Be Costly. Washington Post. Lieberman, T. , (2006). Part D from Outer Space. The Nation. Medicare Rx Education Network. (2006). Montgomery, L. , and Lee, C. , (2006). Success of Drug Plan Challenges Democrats and Medicare Benefit’s Cost Beat Estimates. Washington Post. National Senior Citizens Law Center. (2007). Low Income on Medicare Part D. Newvine, C. , (2006). Students to Help Seniors evaluate Medicare Part D. News Service, University of Michigan. Prindiville, K. , (2007). Change and Instability Ahead for Low Income Beneficiaries. National Senior Citizens Law Center. Wessel, D. , (2006). In Healthcare, Consumer Theory Falls Flat. Wallstreet Journal. Wilson, L. , (2006). The Problems and Solutions of Medicare Part D for Senior Citizens. Senior Journal.