By Howard Gleckman
On Nov. 15, seniors in the U.S. begin to sign up for the long-awaited Medicare drug benefit. The new insurance is the biggest expansion of the program since it began 40 years ago. But the new coverage is coming with a huge downside: Seniors and their families will have to navigate an agonizingly complex set of choices before they can pick a plan. Here's a look at what's good and not-so-good about Medicare Part D, the controversial new drug program.
How will the new law change Medicare?
There are two huge changes. To start, Medicare will offer, for the first time, a prescription-drug benefit to all seniors. At the same time, the government is giving insurance companies billions in subsidies to offer expanded, new Medicare managed-care plans, which will cover doctor and hospital care, as well as drug insurance (see BW, 10/3/05, "Medicare: Decisions, Decisions").
Who should sign up for the drug benefit?
If you don't have drug coverage now, you should strongly consider getting it through one of the plans being offered by Medicare. Prices are low, and benefits are relatively generous, though they vary widely. Seniors who are already eligible for Medicare have until next May to sign up.
Is the program ready to go?
Pretty much, but there are still some unresolved issues. Medicare has done an amazing job pulling everything together, but is still sorting out coverage for very poor seniors who are eligible for both Medicare and Medicaid. And while it recently unveiled a package of Web-based tools to help people wade though their options, the online info is pretty tough to navigate.
How do I know which plan to buy?
That's the challenge. In some states, you'll have to pick from more than 40 different plans -- each with different premiums and benefits. To find out which policies are available to you, go to www.medicare.gov. After that, you'll need to decide which plan suits you best.
Look at the monthly premium, how much you'll need to pay when you fill a prescription, and whether your local pharmacy will take the plan. But the most important question to answer is: How much will a plan charge for the specific drugs you take? Unfortunately, there's no easy way to get that answer, short of contacting the insurer.
Is there anyone who shouldn't sign up?
If you have good retiree coverage from your former employer, you should stick with it (see BW, 6/20/05, "Take the Money and Don't Run"). If you are very poor -- thus also eligible for Medicaid -- you'll be automatically enrolled. Otherwise, as long as you can manage the monthly premiums -- which average about $30 -- you should grab a plan.
That sounds like a pretty good deal. Are prices going to stay low?
Don't count on it. Many insurance companies are offering plans as loss leaders, in an effort to sign up as many seniors as possible right away. They figure that they'll always be able to raise rates or reduce benefits in future years. The battle for insurers now: Grab as much market share as possible among 44 million Medicare patients.
This sounds like a great deal for insurance companies.
It is, but it comes with some risk. The market will never support all the plans that are out there today -- more than 1,300. Insurers also worry about what health economists call adverse selection. In other words, if the only people who sign up for drug insurance are those with big pharmaceutical bills, the insurance companies will take a financial bath.
That's why they want healthy people to sign up, too. To encourage rapid enrollment, your premium will go up by 1% for every month you delay past next May.
What about the managed care plans?
For consumers, these plans, called Medicare Advantage, are a trade-off. You'll be able to sign up for comprehensive health insurance with one company -- often at a lower cost than if you buy separate policies. Plus, good managed-care companies help doctors coordinate care, an especially valuable benefit if you have lots of chronic illnesses.
But you'll be limited in your choice of doctors, hospitals, and drugs. Also, once you switch to managed care, you may not be able to buy a Medicare supplemental policy -- known as Medigap -- if you return to traditional Medicare, especially if you have preexisting conditions.
Are managed-care plans a good deal for insurance companies?
They can be. But there are already signs of trouble (see BW, 10/10/05, "Medicare's Big Experiment"). Many large insurers hope to eventually move many of the seniors they are enrolling in their drug-only plans into Medicare Advantage. But in the past, such managed-care plans have failed, because insurers could not offer a generous package of benefits to seniors and still make a profit.
To change that, Congress has promised insurers billions of dollars in subsidies. But even before the plans have kicked in, Congress is already showing signs of backing away from the deal. A massive budget bill now floating around Capitol Hill would scale back those subsidies. And insurers fear a bait-and-switch, which will leave them again unable to market a profitable managed-care product.
Gleckman is a senior correspondent in BusinessWeek's Washington bureau
Edited by Beth Belton