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Understanding Medicare Prescription Drug Plans

drugsSeniors need to review their Medicare drug plans now, to make necessary changes or be hit with increases they may not be able to afford.

Over the next month and a half, seniors enrolled in Medicare prescription drug plans and Medicare Advantage plans have an opportunity to switch their coverage to another provider. Specifically, the enrollment window stretches from November 15 to December 31st, 2008.

Experts and administrators at the Centers for Medicare and Medicaid Services (CMS) are encouraging seniors to carefully examine the range of plans available and consider making a change, rather than just stick with their existing coverage. The likelihood is that most of them will not switch.

Seniors need to change their plans now:

  • On average, seniors face a 25% increase in monthly premiums for Medicare prescription drug plans.
  • Recipients who are insured by Medicare prescription drug plans with the largest enrollments will see their monthly premiums rise by 43% over 2006 levels.
  • Many companies that initially offered low monthly premiums and generous benefits to rope folks in are now raising the price of the plan and reducing the benefits.
    • For example, Humana’s standard drug plan was billed as the low-market leader in 2006, with premiums at $9.51 per month. Next year, enrollees will pay $40.83, a 330% increase.

CMS administrators are hoping that seniors can avoid these price increases by switching to a plan with lower premiums and co-pays. Experts are also urging enrollees to examine the benefits provided by the plans, and to choose a plan that corresponds to their particular needs. This might help folks to pay less money, and to not pay for items that do not fit with their needs.

Why are insurance companies raising their prices and reducing their benefits?

Insurance companies know that most people are not likely to move between insurance plans.

There are three reasons people do not move:

  • First, once they are comfortable with a plan they do not want to move.
  • Second, and most important, is that it is very time-consuming and difficult for seniors to do the research and to compare the plans on their own.
  • Third, the language used to describe benefits is confusing for seniors and for the non-elderly alike.
    • According to a survey published by J.D. Power and Associates this past spring, 55% of large commercial health plan members do not understand “critical details” of their insurance coverage, including how to find the proper physician, how to appeal coverage denials and how to access prescription drug benefits.

As a result, health insurance enrollees are unable to compare the benefits between differing health plans and to select a plan that offers them the most bang for their buck, in relation to their particular health status.

What does “freedom of choice” mean to the average consumer?

One of the most prominent defenses used to uphold our fragmented health insurance system in the United States is that patients have freedom of choice when it comes to selecting a health insurance policy, and subsequently, greater choice of doctors, hospitals and pharmacies that they visit.

This freedom is choice is supposed to promote economic efficiency, and improved consumer satisfaction and health.

  • Economic Efficiency: Various legislators and other parties promote the many options available as being economically efficient, by arguing that businesses and individual “consumers” can shop around for the best service packages at the lowest prices, thus encouraging insurance companies to lower premiums and improve care options.
  • Satisfaction and Improved Health: Proponents also argue that patient satisfaction, and presumably overall health, increases when individuals are given a range of options about doctors and hospitals to visit. Along this line of thinking, patients can choose the best health care options for themselves, and doctors and hospitals must step up quality to compete for patients.

The truth is that patients lack the information the information they need to have to encourage efficiency in the health insurance market. And because folks often cannot understand the details of their plans, they may not have the access or costs that they think they have. This means that their health care or their bank accounts or both may suffer.

It seems the real beneficiaries here are the insurance companies themselves. By confusing the customer, they prevent good choices from being made.

A Growing Movement: Health Literacy

In response to the challenges facing many health consumers when it comes to understanding their health insurance options, some reformers are working on increasing “health literacy.” Even though offered as a “free” service, additional employees will have to be hired to help people – causing health care costs to rise even further.

Health literacy efforts in the past have focused primarily on educating people about how to manage their chronic diseases, so that they can maintain their health and avoid costly visits to the emergency room.

But there is also a budding movement to teach people how to understand and analyze insurance coverage options. Both presidential candidates spoke about the need to make health insurance information more accessible.

Some community and senior centers are offering free assistance for interested individuals.

Representatives from the Centers for Medicaid and Medicare Services (CMS) are recommending that Medicare enrollees visit the Medicare site and use their online comparative tool (although this might be problematic for many seniors who don’t have Internet access or know how to use it).

Articles about health insurance options are also appearing with increasing frequency in newspapers and other publications aimed specifically at seniors.

Help is available, but you might have to wait in line to get it, and there is no guarantee that you will understand it once you do get it. If you are a Medicare enrollee, and you need assistance in selecting an insurance plan, you can also call the Social Security Administration at 1-800-772-1213, to speak with a representative.

It is recommended that seniors find the answers to the following questions before selecting a health plan:

  • Does the plan cover the drugs that I am taking?
  • Does my pharmacy accept the plan?
  • How much do copayments and monthly premiums cost?
  • Is there coverage for the Medicare gap?
    • The Medicare gap, also known as the doughnut hole, occurs when the total cost of prescription drugs paid for by the insurance company and the patient reaches $2,700. Between this point, and $4,350, the patient is on her own when it comes to paying for prescription drugs.
  • How much will the plan cost overall?
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