Medicare Drug Plan

I recently went through the exercise of trying to figure out the new Medicare prescription drug plan for my mother. She spends about $200 dollars a month for her medications. Not much for someone in their 80s and she is lucky and can afford it. Under the new medicare plan she will save about $10 a month or 2 percent, not much but better than nothing. Paul Krugman points out today that others won't be so lucky, after a few months that is. (Available at Truthout)

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.

Many will react by simply not taking some medication and as a result some will die. How can this be you ask? Krugman goes on to explain that the medicare drug bill was never designed to actually help people it was, like everything else the Bush administration has done purely political.

Once you recognize that the drug benefit is a purely political exercise that wasn't supposed to serve its ostensible purpose, the absurdities in the program make sense. For example, the bill offers generous coverage to people with low drug costs, who have the least need for help, so lots of people will get small checks in the mail and think they're being treated well.

Meanwhile, the people who are actually likely to need a lot of help paying their drug expenses were deliberately offered a very poor benefit. According to a report issued along with the final version of the bill, people are prohibited from buying supplemental insurance to cover the doughnut hole to keep beneficiaries from becoming "insensitive to costs" - that is, buying too much medicine because they don't pay the price.

A more likely motive is that Congressional leaders didn't want a drug bill that really worked for middle-class retirees.

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Paul Krugman, Medicare, Prescription Drugs