Krugman on The Deadly Doughnut

This doughnut is one of the many flaws in the Medicare prescription drug plan. Paul Krugman tears apart Bush’s Medicare prescription drug plan:

At first, the benefit will look like a normal insurance plan, with a deductible and co-payments.

But if your cumulative drug expenses reach $2,250, a very strange thing will happen: you’ll suddenly be on your own. The Medicare benefit won’t kick in again unless your costs reach $5,100. This gap in coverage has come to be known as the “doughnut hole.” (Did you think I was talking about Krispy Kremes?)

One way to see the bizarre effect of this hole is to notice that if you are a retiree and spend $2,000 on drugs next year, Medicare will cover 66 percent of your expenses. But if you spend $5,000 - which means that you’re much more likely to need help paying those expenses - Medicare will cover only 30 percent of your bills.

A study in the July/August issue of Health Affairs points out that this will place many retirees on a financial “roller coaster.”

People with high drug costs will have relatively low out-of-pocket expenses for part of the year - say, until next summer. Then, suddenly, they’ll enter the doughnut hole, and their personal expenses will soar. And because the same people tend to have high drug costs year after year, the roller-coaster ride will repeat in 2007.

How will people respond when their out-of-pocket costs surge? The Health Affairs article argues, based on experience from H.M.O. plans with caps on drug benefits, that it’s likely “some beneficiaries will cut back even essential medications while in the doughnut hole.” In other words, this doughnut will make some people sick, and for some people it will be deadly.

The smart thing to do, for those who could afford it, would be to buy supplemental insurance that would cover the doughnut hole. But guess what: the bill that established the drug benefit specifically prohibits you from buying insurance to cover the gap. That’s why many retirees who already have prescription drug insurance are being advised not to sign up for the Medicare benefit.

If all of this makes the drug bill sound like a disaster, bear in mind that I’ve touched on only one of the bill’s awful features. There are many others, like the clause that prohibits Medicare from using its clout to negotiate lower drug prices. Why is this bill so bad?

The probable answer is that the Republican Congressional leaders who rammed the bill through in 2003 weren’t actually trying to protect retired Americans against the risk of high drug expenses. In fact, they’re fundamentally hostile to the idea of social insurance, of public programs that reduce private risk.

Their purpose was purely political: to be able to say that President Bush had honored his 2000 campaign promise to provide prescription drug coverage by passing a drug bill, any drug bill.

Krugman shows some faults in the plan, as well as some of the political motivation behind this sham. He leaves out one important fact–most likley something he realizes but he could not get everything in one article. The Medicare drug bill was never intended to provide benefits for Medicare beneficiaries. This was written by opponents of the Medicare program to attempt to destroy the program while providing corporate welfare to the pharmaceutical and insurance industries.

Only in Bush World does the government prefer to provide welfare to pharmaceutical and insurance companies as opposed to elderly people who are having difficulty paying for their medications.