Fewer Choices in Medicare Bill Than Some May Have Expected

December 8, 2003
President Bush signs the Medicare bill today, proclaiming it as providing choices to Medicare beneficiaries. But upon a close reading, it turns out the bill restricts certain choices.

Perhaps most surprising, the measure prohibits the sale of Medigap insurance after Jan. 1, 2006, when the drug benefit becomes effective.

Seniors can now choose to buy Medigap insurance that covers the costs not covered by Medicare. They can choose from ten standard policies. But in passing the new Medicare bill, Congress wanted to be sure that old folks bear some of the cost of their medical treatment.

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Health economists argue that beneficiaries use more health care services when there's no out-of-pocket cost. Congress chose to take care of that. The new bill establishes a $250 deductible for prescriptions and then requiries beneficiaries to pay 25 percent of drug costs from $251 to $2,250 and all of the net $2,850, for total personal exposure of about $3,600 per year. Private Medigap cannot cover any of those costs.

There's another no-choice kicker in the bill: the Medicare drug benefit will only cover drugs that are on a list of approved medications, known as a formulary. Anyone whose prescriptions aren't on that list will get nothing -- and if they choose to pay for it out-of-pocket, the expense will not be counted toward their deductible or any of the other required payments.

"In other words, the choice will often come down to choosing whether to take the drugs the doctor prescribes and paying for them yourself -- or not taking them. Not much different from what we have now," said one disgruntled elder.

"The legislation creates limited but baffling choices for ill-informed consumers unable to predict their needs, judge quality of service, or price shop effectively," said Geraldine Dallek, a Washington health policy analyst. "Congress has designed a 'benefit' so complex that it might not benefit the very people it's designed to help," Dallek said.

Judy Feder, Dean of Policy Studies at Georgetown University, predicted that seniors and the disabled on Medicare will be utterly confused by the complexity of the choices they will face -- but that they already understand how small the benefit is. "They get that the benefit is limited. It's not what they've been promised," she said.

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