Warn Seniors Not to Buy the Most Expensive Medicare Part D Plan in the County

October 11, 2012 in Medicare

There is an interesting article posted on the Health Day blog of U.S. News October 11 headlined

 “Many Seniors Overpaying for Medicare Drug Plans”

The underlying research comes from a University of Pittsburg duo. Chao Zhou is a postdoctoral associate in the Department of Health Policy and Management, and Yuting Zhang is an assistant professor of health economics. I am sure it is not coincidental that this research appeared this week and Open Enrollment for Part D Prescription Drug Plans (and Part C Medicare Advantage plans which typically include Part D) begins Monday October 15.

This subject needs substantially more discussion. The U.S. News article says choosing a prescription drug plan

“… often leads to seniors paying hundreds of dollars more a year than they need to…”

But the actual research (gated on Health Affairs) referred to in the U.S. News article says

“Median total patient spending—that is, out-of-pocket drug costs and premiums—in 2009 was $990.”

It’s hard for me to figure how seniors are paying “hundreds of dollars more a year than they need to” when they are only paying hundreds of dollars a year in the first place. But I know from personal experience as a SHINE volunteer that some over spending on drug plans occurs…

(It occurs for other Medicare supplements as well. But it’s on purpose as is this over spending probably. Maybe fodder for another post some day).

The reasons for over spending on prescription drugs by seniors suggested by the University of Pittsburg researchers are:

  • Part D beneficiaries choose no-deductible-in-initial-spend-phase plans rather than using a deductible as the creators of Part D originally anticipated
  • Part D beneficiaries born before 1930 tend to over-insure themselves compared to younger seniors
  • Part D beneficiaries nationally pay extra for coverage of generic drugs in the donut hole (this should not be an issue in Massachusetts because of our State Pharmaceutical Assistance Program, Prescription Advantage; I don’t think any Massachusetts plans even offer donut hole coverage but am not sure)

The authors of the University of Pittsburgh research also said the number of underlying plans available in a given geography also affects overspending. But the researchers’ own data (on page 2261 of Health Affairs) seemed to contradict that finding (and the authors admit that the finding is contradictory and not definitive). Most obviously, Alaska had the fewest plans but the highest median over spending. The reverse was true in West Virginia. Alaska is probably an outlier but something about Alaska (e.g., drug supply chain issues) might also suggest why the authors found some correlation between the number of plans and overspending elsewhere, but that that correlation is not something inherent in Part D itself. 

The good news about Part D that was unfortunately not mentioned in U.S. News or the underlying University of Pittsburg research:

  1. Part D is very popular
  2. Part D has saved seniors up to $100 billion since 2006 (see good news point 1 above)
  3. Part D is costing both seniors and the government substantially less than originally estimated (also see good news point 1 above)
  4. Part D is available at no or low cost to low income seniors; low income seniors are not affected by the donut hole; low income seniors also get nominal co-pays (because of this, the University of Pittsburg researchers did not include low-income seniors in their number crunching; the overspending — whether it is as high as the researchers estimate or lower than that as I estimate — is done by middle and high income seniors)
  5. All kinds of assistance is available to seniors, typically at their local senior center, to help them make the right choice; 25,000 government-certified volunteers are ready to help starting Monday

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