Recap of Medicare Part D in 2007 Posted by Daniela at 12/31/07 05:13 PM

Open enrollment for your prescription drug plan under Medicare Part D ends today. Over 1,800 private insurance plans to choose from, but they all cost too much, and the costs keep climbing.

Just before House Members were scheduled to vote on a new Medicare bill in January 2007, a Families USA report found that Medicare pays 58% more than Veterans Affairs for the same drugs. Consumers Union, in February 2007 reported frequent price increases among five commonly prescribed drugs in five U.S. zip codes. Over a quarter of the plans increased costs for the selected drugs by 5% or more in 2006 and 95% of all plans increased their costs in a one-month period from January to February in 2007. USA Today reported our findings along with criticism from the Centers for Medicare and Medicaid. Leslie Norwalk, acting CMS administrator, wrote:

Approximately 90% of Part D beneficiaries pay co-pays that do not fluctuate during the year. These consumers are generally shielded from any price changes.

You should note that Norwalk mentions co-pays, not prescription drug costs. And many plans reduce monthly premiums while still increasing the overall annual costs. A joint CU-Medicare Rights Center report in October offered a taxpayer solution to Part D. Since taxpayers fund three-fourths of Medicare Part D costs, we all pay less if Medicare pays less.

Some lawmakers have been trying to let Medicare negotiate drug prices. Though the House version passed in January 2007, the Senate unfortunately blocked a vote on this in April. President Bush has vowed to veto both versions of the bill. With seniors gearing for the next election, when they will vote for those who show they care, Congress should make it their 2008 new year’s resolution to forcefully address the rollercoaster of high prescription drug costs.

comments (2)

1 Posted by Benjamin Crocker at 03/16/08 10:56 PM

Daniella's post about the fixed copays not shielding people from high prices is right on the money. The allowance that each Medicare D participant gets between the deductible and the donut hole is a fixed amount from which the price of each medication less the copay is deducted. As prices rise, more of your allowance is spent, faster, so you are more likely to get to the donut hole. Some common generic medications cost 3 or 4 times more in Medicare D plans than from discount vendors like Target/Walmart, RxOutreach, or Costco. People who take several of these generic medications could wind up spending hundreds of dollars a year more out of their initial allowance than the medications would have cost elsewhere, in some instances the copay alone is more than the full cost of the medication elsewhere. Generics are seen as inexpensive, but they have a much larger markup than brand medications, and if you are paying twice the price for them it makes a difference. Especially when you get to the donut hole. Prices are pretty easy to check on the Medicare website, but few people seem to do it.

2 Posted by Richard Rogers at 05/02/09 12:30 PM

Insurance companies offering Medicare Part D prescription plans are significantly inflating the cost of prescription drugs. These companies are not the solution to high medical costs, but are a SIGNIFICANT PROBLEM. In reality they are not providing insurance since they are taking no risk. All costs are directly born by individuals and the government. They supply a bookkeeping function.

I am 64 now and will be applying for Medicare next year. I am a Type I diabetic with high blood pressure and have an accurate estimate of my yearly prescription costs. Being unemployed without any insurance I will be paying retail costs this year of $3316.2 based upon actual expenses at my pharmacy.

Using, as an example, my projected 2009 prescription expenses, the “standard” federal Medicare Prescription Drug program should produce the following:

Cost Range Out-Of-Pocket Govt. Cost
Deductable $295.00 $0
$295–2700 $601.25 $1803.75 “In Plan”
$2700–3316.92 $616.92 $0
~Annual Prem $360.00 $0
============= ======== ========
Total $1873.17 $1803.75

The annual insurance premium, above assumed to be $360, should pay for the insurance companies cost of administering the program plus their profits. One would not think insurance companies should receive a profit for the work done by pharmaceutical manufacturers and distributors ie the retail cost. Nor should they make a profit on the government contribution.

I’ve spent the last for or five days reviewing the 54 Medicare Part D policies offered by various companies in Arizona where I live. The results of this I find disturbing. Let me detail data on Out-Of-Pocket results for 26 plans that have a prescription formulary that covers my needs and for which I can find detailed information.

Yearly “In Plan”
Ins. Co. OOP Monthly Cost
Standard $1873 $77
Average $2369 $128
Min $1666 $57
Max $3546 $255
Median $2223 $118

For $276 worth of prescriptions, the “In Plan” Monthly Cost is the real dollar amount paid by a “beneficiary”, me in this example. The government contributes $207. Note the “average” insurance company pockets $51 on $276 of receivables from the government and individuals. This DOES NOT include the monthly premium expense.

Insurance companies are significantly INFLATING the cost of prescriptions. Just taking the yearly “In Plan” retail cost of $2405 the “average” insurance company is increasing this to $3017 or 25% which the people and the government are paying.

Insurance companies may argue they provide added benefit because they eliminate the $295 deductible, but those offering plans with $0 deductibles all charge monthly premiums much higher than those with a standard $295 deductible. Insurance companies may argue that they offer some generic prescriptions at zero or low $5 charges. However, I note that these Tier 1 drugs are very low cost and the government is paying 75% of it. I have found the amount of the copay is frequently greater than the actual retail cost charged by pharmacies near me. On top of this the government pays 75%.

As I first stated these insurance companies are not a part of the solution to high prescription costs, they are a significant contributor to overly high costs.

Regards, Richard Rogers