New Medicare drug plan for seniors has many scratching their heads

NORTH COUNTY ---- One week after the launch of the new prescription drug plan for seniors called Medicare Part D, local reaction is mixed, with many North County pharmacies reporting a high level of confusion among seniors.

Tip Clements, owner of Fallbrook Pharmacy and a pharmacist with 40 years experience, assigned a 9 of 10 (10 being the greatest confusion) as the program commenced.

"Most of them haven't signed up yet," Clements said. "They're still in the decision phase.

"We've got one person spending maybe half (of each) day trying to counsel customers. That's free to customers, but not free to our business."

Besides counseling seniors, pharmacists are also bearing the burden of nationwide systems glitches that are preventing seniors from getting necessary medicines. Fallbrook Pharmacy has filled 300 prescriptions to date without payment.

"We have a history with these patients, so we gave (them) their medications. If we know them, they get their medicine," said Richard Clements, who has been in the pharmacy business with his father for 20 years.

But he worries about the reimbursement. "Manufacturers want to be paid every two weeks. ... It's scary, because we don't know if we'll be paid or how much."

The amount pharmacies will be reimbursed from insurers contracting with Medicare is still largely unknown. Notification letters from two providers to Fallbrook Pharmacy indicated that fees would be low relative to the extra level of services required to serve Medicare Rx customers.

"(Low reimbursement) means businesswise, the pharmacy sucks it up," said Tip Clements.

Seniors are frustrated.

"If I could find out who started this program, I would choke them," complained senior Irving Wood of Fallbrook on Thursday. "My wife and I have been without medications for three days. ... The way it looks, I have a better chance of dying (than getting medications)."

Wood, who had a Medicare Advantage plan that included prescriptions, has a new ID card that states his coverage for Medicare Rx, but Sav-On Pharmacy in Fallbrook was unable to complete the transaction to verify his coverage, he said.

Le Hua, a pharmacist at Walgreen's in Vista, graded the confusion level at 7 of 10. "Some people haven't received their cards yet. Some don't know they've been enrolled," she said last week. From a cost perspective, though, the program "didn't seem too expensive for the people I've seen today."

Systems glitches

One company, National Data Corp. has the sole contract to process eligibility for Medicare Part D. Pharmacies pay the company one half cent to process transactions to check eligibility, and they also pay the insurer from 1 cent to 11 cents to have a transaction submitted to them via NDCHealth.

To implement this hub-and-spoke system, pharmacies were required to implement a variety of new software to handle Medicare Part D.

Unfortunately, said Richard Clements, "The bottom line is they weren't prepared (to handle the transaction volume). ... One big computer in the sky just can't handle it."

Choosing a plan

Medicare Rx has been widely criticized for its complexity. Since mid-November, 42 million seniors have had the opportunity to choose a provider for prescription drug coverage, but as the program launched January 1, only about half that number are actually enrolled. This week, however, system officials noted a large surge in year-end enrollment as a cause for computer delays nationwide.

Confirming that by mid-December only about 1 million new enrollees had signed up for Medicare Rx, Jeff Flick, regional administrator for the Centers for Medicare and Medicaid Services, pointed out that another 4.4 million enrollees to Medicare Advantage have "substantially better coverage than they had."

Because computer resources are needed elsewhere, the agency will only update enrollment figures monthly, he said.

Confusion reigns

Pharmacists across North County seemed to agree that it is really too early to tell whether Medicare Rx can be successfully implemented and whether it will have a positive impact on seniors' health. Several mentioned the complex operational process of getting ID cards to so many new enrollees.

Medicare officials anticipated a range of issues for the new program, and processes are in place as the program kicks off, Flick said. Seniors should receive acknowledgment letters about a week after they enroll with one of the dozens of providers approved by Medicare to offer plans in California.

Seniors can take this letter to the pharmacy as proof of coverage. Medicare Rx plan ID cards will follow three to five weeks later.

Besides operational issues, much of the complexity in the program comes from the variety of choices seniors have to acquire coverage and the large number of insurance providers offering each style of coverage.

The two major ways to get coverage are via standalone Prescription Drug Plans (PDPs) and Medicare Advantage Plans (MAPD), HMO-style plans that combine benefits found in Medicare Part B with prescription drug benefits. Both types of plans are offered via private insurers contracting with Medicare, but subsidized by Medicare. Overall, these subsidies are expected to reimburse 75 percent of program costs.

California insurers offer San Diego area consumers 47 choices of the standalone plans and 110 different Medicare Advantage plans. All meet the Medicare approval requirements for "standard" coverage, but many require no deductible and a few charge higher premiums but eliminate the "coverage gap" where seniors pay 100 percent of drug costs between $2,250 and $3,600.

All plans have the mandated out-of-pocket maximum $3,600 in covered expenses before catastrophic coverage kicks in to pay 95 percent of covered drug costs.

The word "covered" is important. Costs for drugs that are not part of a plan formulary ---- the listing of the drugs the plan covers ---- do not count toward this maximum. Purchases outside a preferred network of pharmacies may also result in fewer benefits to seniors.

Duplicate coverage is another area of concern nationwide. Seniors who had Medicare supplement plans H, I, and J that included limited prescription coverage will not be able to continue with these plans.

Seniors who want to switch plans prior to the May 15 deadline may do so. All seniors may also change plans during annual open enrollment periods that run from Nov. 15 to Dec. 31. In addition, dual-eligible seniors and disabled people ---- those who qualify for both Medicaid and Medicare ---- are "considered to be a more vulnerable population," said the Medicare center's Director of Communications Jack Cheevers, citing lower education levels and less access to the Internet. They may switch plans at any time.

Local competition high

Cost competition between plans appears high for both standalone PDPs and MAPDs, especially in Southern California.

"No one thought we'd have prices as low as $5 per month," said Flick, referring to Humana's $5.41 per month standard plan, the lowest cost standalone plan in California. Flick also pointed out that many Medicare Advantage plans rolled in enhanced Medicare standard drug coverage at no premium increase as a competitive measure.

Estimating how year-over-year costs might change for seniors "is very hard to do" with available data, Flick said.

The national average monthly plan cost for standalone plans is about $32, according to Cheevers.

In California, average 2006 premiums are $25, because of the high number of providers competing for a large pool of eligible seniors, Cheevers said.

HMO-style Medicare Advantage plans are far more popular in Southern California than across the nation.

Thirty percent of California seniors have a Medicare Advantage plan compared with 16 percent nationwide, and enrollment is climbing. Nationwide figures are expected to be 24 percent by 2009, according to statistics of the Office of Management and Budget.

The same PDP standalone coverage is available throughout California, but to participate in Medicare Advantage, seniors have to first find out which plans are available in their county. For seniors with access to the Internet, www.Medicare.gov has the information seniors need to identify available plans and projected costs for the drugs they take.

Side-by-side comparison

The chart accompanying this story shows a comparison of annual out-of-pocket costs for a senior taking three common drugs. For this basket of drugs, Medicare Rx was a clear money-saver, costing $2,139 for the least expensive California PDP versus $3,276 or more for a senior with no insurance for prescription drugs.

Using a Canadian pharmacy would cost slightly less ---- $2,056 ---- but would expose the senior to increased financial risk in the event of a major illness.

Strategies such as splitting pills and using generic substitutes or less expensive drug alternatives produce significant savings. Our hypothetical senior could save more than $1,000 annually by splitting pills alone, since per-pill drug costs tend to be nearly equal, regardless of dosage.

As a check, identical parameters were entered for the AARP plan at aarp.com with identical results. The AARP site gives additional information outlining savings available from generic alternatives.

In this example, Fosamax and Lipitor could be split. A doctor would need to prescribe the higher dosage to implement this strategy.

For this basket of drugs, low-income seniors who qualify for extra help would pay less than $150 for the year in the form of small co-pays with no monthly insurance premiums and no or reduced deductible. Once approved for extra help, they would save in the form of smaller co-pays with no monthly insurance premiums and no or reduced deductible.

What should seniors do today?

"For people who have decided they want coverage, they should go ahead and enroll now so they can take advantage of this important new protection," said Dr. Mark McClellan, administrator of Centers for Medicare and Medicaid Services.

Seniors who wait will incur a 1 percent per month penalty based on the national average premium for the year they eventually enroll, according to CMS spokesperson Peter Ashkenaz.

Seniors who are eligible for Medicare as the plan commences but wait to enroll may quickly pay more in penalty than they pay in premium. A senior's monthly cost would be whatever their chosen plan charges in the year they eventually enroll, plus the penalty.

Similar to Medicare Part B, the penalty has no cap, and is charged every month the senior is subsequently enrolled in Medicare. Late penalties are a common actuarial tool used to encourage healthy people to enter the insurance pool, partially offsetting the costs of the unhealthiest members.

Jeff Flick of CMS advises seniors to get help from a source with no financial interest in their decision.

"Once somebody gets help, especially from HICAP or 1 (800) MEDICARE, (the program) is a lot easier to digest."

Tips to get the greatest benefit from Medicare Rx

Sign up before May 15. The late sign-up penalty is estimated at $0.32 per month of delay, paid for the rest of your time on Medicare Rx.

If you are dual-eligible for Medicare/Medicaid, you may switch plans at any time, so make sure the plan you choose covers the drugs you take.

Other enrollees may switch before May 15, or during open enrollment periods (Nov. 15-Dec. 31 every year).

Consider splitting pills. Many pills can be purchased in higher dosages and split, saving huge amounts and perhaps avoiding the coverage gap where seniors pay 100 percent.

Use generic drugs where available and effective. Generics often have lower co-insurance and substantially lower overall costs.

Know your plan's formulary. Take a copy to the doctor's office to help find the lowest-priced drugs that will meet your needs.

Exercise the exception process. Plans may be able to include a non-formulary drug when medically necessary. Ask. Your plan must respond within 72 hours.

Get help. HICAP and 800-MEDICARE can assist with the selection process. Seniors should try to use resources that don't have a financial interest in their decision. Medicare.gov has easy-to-use online calculators to compare costs.

Seniors still working who have employer-sponsored health insurance should ask their employers about incentives to switch to Medicare.

Retirees should be aware that if they switch to Medicare Rx (from an employer plan), they probably won't be able to switch back.