Sign now, pay later

President Bush signed the Medicare prescription drug bill into law Monday, calling it "the greatest advance in health care coverage for America's seniors since the founding of Medicare." As details of the law emerge, however, that grandiose claim may not ring true with most Medicare recipients.

The new law should offer relief to some retirees, particularly those with catastrophic drug costs and low-income seniors whose premiums will be subsidized. Others who choose to sign up for the plan will still face substantial charges for their prescriptions. After monthly premiums of $35 (or more) and a $250 deductible, the plan would cover 75 percent of drug costs up to $2,250, but recipients would be responsible for all costs after that until total drug expenses reached $5,100, when they would pay only 5 percent of additional costs.

So at some spending levels, retirees would pay thousands for their drugs while Medicare would cover as little as 30 percent of that cost. Those seniors aren't likely to see this as a great advance in coverage.

There is another potential drawback to the new law. It will be up to private insurers to determine which brand name drugs will be covered. If a recipient's medication is not included on the list, then the individual will pay the entire cost of the drug. Even after a recipient buys into a plan, its drug list could change.

Those who counted on buying supplemental insurance (called Medigap) that includes drug coverage will be the first to notice a change. When the law takes effect in 2006, it will ban new Medigap drug policies (although those already with such coverage will be allowed to keep it). Medicare officials say the government drug plan will be superior to Medigap policies, and that is why those policies will no longer be needed. Yet even if that proves to be true, shouldn't recipients be allowed to make that choice?

Currently, 15 percent of Medicare recipients (nearly 6-million people) have Medigap policies. Most of them do not include a drug benefit, but they pay for deductibles and other costs charged by doctors and hospitals that aren't covered by Medicare. A bad surprise for those retirees could be on the way, too. Congress says it wants them to pay more for their medical care. Otherwise, "beneficiaries become insensitive to costs," according to a report attached to the drug bill.

That is one way to look at it, but here is another: Medicare recipients who buy supplemental insurance are making a choice to pay substantial premiums now for protection when the need arises. When they find out their policies could be worth less, they may not consider it progress.

There are other pitfalls. The new law prohibits the federal government from negotiating a discount from drug makers, so the portion recipients pay for a drug could be based on an inflated price compared with other drug plans. And the law tries to pressure retirees into signing up for the Medicare drug coverage by charging a higher premium for those who wait - at minimum, an additional 1 percent for each month of delay. Recipients could be forced into a decision before they have had time to determine if it benefits them.

None of that addresses the greatest threat to Medicare - the plan's cost. Adding a drug benefit will put another financial burden on the program. Congress has allocated $400-billion over 10 years, but that cost would balloon to somewhere between $1-trillion and $2-trillion in the following decade, an amount that will only hasten Medicare's insolvency. Even a requirement in the law for private medical insurance to compete in some areas of the country could be counterproductive, because those plans could be more expensive for the government than traditional Medicare.

At some point, Congress will have to raise taxes, cut benefits or charge recipients more for their medical care. But nobody wants to talk about that day, which grows closer.

© 2006 • All Rights Reserved • St. Petersburg Times 490 First Avenue South • St. Petersburg, FL 33701 • 727-893-8111 Contact the Times | Privacy Policy Standard of Accuracy | Terms, Conditions & Copyright