Medicare Part D
Essay Preview: Medicare Part D
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Medicare Part D Drug Plan was created by Congress in 2003 to aid the elderly, disabled, and sick persons in affording their medication. Coverage for the drug plan went into affect January 1, 2006. This plan was called the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA) (Cassel, 2005). The final bill that passed, was influenced by drug-company and health insurance lobbyists and focused mainly on the needs of those industries instead of the seniors it was meant to serve (Slaughter, 2006). These plans are operated by insurance companies and some private companies that have been approved by Medicare. Part D is optional only if a person carries health insurance that includes prescription coverage. If at retirement age a person has not signed up for a Medicare drug plan they will pay a penalty for the rest of their lives for signing up at a later date. My father took four prescribed drugs in 2007. One was not covered by the plan and the other three were non-generic. In 2007 my Dad paid over $3,300.00, while �The Plan’ paid $1940.00. Can you imagine how much he would have paid if he took 5, 7, or 10 different prescribed medications? Due to the increased cost of prescription medication he will pay more for those three non-generic drugs in 2008. Medicare’s Part D Drug Plan was created to aid the country’s older population with the cost of prescription drugs, but instead the plan increases profits for the insurance industry. Insurance companies need to work together to develop uniform guidelines and a pricing structure that is affordable to all senior citizens.
How are the insurance companies involved in this prescription drug plan? Many elderly had to enroll in a plan by a swiftly selected deadline or face increased premiums each month beyond it, which clearly benefits the insurance companies. Older Americans had little time to choose among the many plans available (Slaughter, 2006). The insurance companies, which are contracted with or subsidized by Medicare, provide the coverage for prescription drug costs (Gustaitis, 2007). Just about all of these plans associated with Part D require a person to pay a yearly deductible, a monthly premium, co-payments for each prescription drug, and 100% of the drug cost while in the “gap” (Gustaitis, 2007). And the plans can change formularies whenever they want to without penalty, increasing prices on doctor prescribed drugs. As Louise Slaughter stated in her article Medicare Part D — The Product of a Broken Process in 2006, “Doctors, not insurance-company bureaucrats, should be deciding which drugs their patients need”. Because there are so many different companies involved, the plans policies and features vary greatly.
The way the plan works is a person will pay a monthly premium for the drug coverage the same as they do on any insurance policy. This monthly premium is set by the insurance company that carries their plan. For this explanation the amounts used will be from the AARP MedicareRX Plan for 2007. Starting January 1 a person enrolled in this plan will pay a monthly premium of $27.40. For each prescription that is bought there is a co-pay of $28.00, unless the drug is classified in the formulary in tier 3 which has a higher co-pay. They will continue to pay only the co-pay until the total of the co-payments and the amount Medicare has paid for their medications combined reach a set total amount of $2400.00. For example, if the co-payments equal $460.00 and Medicare’s portions of the prescriptions were $1940.00, the total drug cost would be $2400.00 (aarpmedicarerx.com). This is considered the first plateau or first level reached in the plan.
The second plateau or level of the plan is what the industry calls “the doughnut hole” or “gap”. While in the gap people must pay 100% of their drug costs until their out-of-pocket costs of $3850.00 is reached. Included in the $3850.00 is the $460.00 paid in co-payments and the total of all drugs paid at 100%, which would equal $3390.00. Most drugs paid for while in the gap are discounted from the retail price in an agreement between Medicare and the pharmacy. Once the out-of-pocket total maximum has been reached, the third plateau or level called “catastrophic coverage” takes affect. During the catastrophic coverage the co-payments drop to 5% and Medicare picks up the reminder of the cost of the drug (aarpmedicarerx.com). In 2007 the standard Medicare Part D benefit will work as follows:
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Monthly payments of at least $25 per month depending on the plan.
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A deductible of the first $250 in prescription depending on the plan. Some plans do not have a deductible.
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After the deductible is met, Medicare will pay 75% of the drug costs up to $2400. This amount is the total of co-pays and the amount Medicare pays.
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After the $2400 is met, the senior pays 100% of their drug costs until the total spent equals $3850. This amount is the total of co-pays plus the total drug cost paid at 100%. It does not include the amount Medicare has paid.
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After a person has spent a total of $3850 on their prescription drugs, Medicare will then pay 95% of the drug costs (ssll.benefitscheckup.org).
Sounds simple right? Well now the insurance companies step in making changes and the plan begins to get more complicated. Every year the insurance companies raise all cost associated with their particular policies. So now there are bigger premiums, larger co-payments, and some amounts not covered by the plan, so seniors will still be spending large out-of-pocket amounts for medication (Matthews & Berman, 2004). Each insurance plan has a list of drugs that they cover called a formulary (Gustaitis, 2007). Within the formulary the drugs are divided into tiers. Co-payments are based on the tier that the drug is in and range from tier 1, the least expensive drugs, to tier 3 the most expensive drugs. Each insurance company plan is allowed to add or drop drugs from their formularies and move drugs from one tier level to another throughout the year. An insurance company can also drop a drug in the middle of the year, but must continue covering the drug for anyone taking it until the next reenrollment period, at which time a new plan will have to be chosen that covers that drug (Gustaitis, 2007). Although not used a lot there is a fourth tier that is for specialty drugs only. Some plans use a flat-rate or assign a percentage co-pay to the higher tier drugs (Gustaitis, 2007). Other characteristics of the insurance company plans that they have control over are requiring prior authorization