Friday, November 11, 2005

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.

4 Comments:

Anonymous Anonymous said...

Mr. Krugman needs to check what PDP plans are available. Humana offers a plan nationwide that DOES cover the “Doughnut Hole” for both generics and brand name drugs. (My wife and I will save almost $4,000 from what we are now spending with just a Drug Discount Card.) You don’t even need to know what you are paying for your drugs now, but it helps. You pay nothing but co-pays until your out of pocket expenses reach $3,600. After that, you pay only 5% of the cost of the drug. Be sure to check mail order pricing. Savings can be large. Not everone needs this much insurance. Run your medications at www.medicare.gov before selecting a plan then cross-check the results with the insurance company. (The plan finder still has a lot of bugs.) The drug plan is still a work in process. Unfortunately, unless you are taking NO medications, you must do some homework. One plan does not fit all. It still beats anything that has been done before.

12:52 PM  
Blogger Ron Chusid said...

Krugman is generally correct in his political analysis, but you are correct that some plans are covering the donut.

For the benefit of people affected, while there are serious political objections to what is being done with this plan, and while people on Medicare should have been offered better, the plan is still beneficial for many people on Medicare.

Even if you are on no medications you should still consider this plan as it becomes more costly the longer you wait to join. Plus you can only join one a year so if you don't join by May it is possible to wind up with a new medical problem requiring expensive medications and not be able to join for months.

1:16 PM  
Blogger Ron Chusid said...

The plan is helpful but out of pocket expenses are greater than in Bob's post. There is the montly premium (which is higher for plans which cover the donut), a deductible in most plans, and co-pays tend to be quite high. When I checked the Humana plan that covers the donut I found it costs about $60 per month in Michigan and many medications had copays of $60 per drug. Of course older generic medications will have a much lower co-pay.

1:21 PM  
Anonymous Blue Cross of California said...

The deadly doughnut is greatly described by Krugman on the health care system.

7:46 PM  

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