Healthy Policy

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After Friday's announcement that Medicare would extend the Part D enrollment deadline for low-income beneficiaries, Leslie Norwalk, the Deputy Administrator of CMS, said it is not legally permissible, according to rules set out in the Medicare Modernization Act:

The 2003 Medicare law states that a "special enrollment period" beyond the deadline can be established only for beneficiaries with exceptional circumstances (Freking, AP/St. Paul Pioneer Press, 4/14). CMS earlier this month announced that it will allow "ongoing" enrollment in the Medicare prescription drug benefit for beneficiaries who qualify for a low-income subsidy (Kaiser Daily Health Policy Report, 4/14). Democratic lawmakers and some advocacy groups have been pressing the Bush administration to extend the deadline for all Medicare beneficiaries. However, Norwalk said giving an extension to all 43 million eligible beneficiaries would "undermin[e] what Congress put into place." She added, "Our actuaries tell us 1.6 million fewer people would enroll if we do that. We are not going to push back the deadline." Norwalk also said the deadline encourages people with relatively few drug expenses to enroll, allowing for lower overall costs.

So when you mess around with the enrollment deadline, it does, in fact, discourage people from signing up until the next deadline.  CMS was proposing to extend the deadline indefinitely, which is a truly terrible idea, because those who are not inclined to do so (i.e. those without high drug costs) will definitely not sign up. 

More than that, the problem with this bill is not the deadline, and Democrats (and others) need to stop pretending it is.  The problem is the huge array of "choices", which make it overly difficult to choose a plan, and is therefore acting as a huge barrier to enrollment.  Changing the deadline won't solve that problem, and as Norwalk says, might actually decrease the enrollment. 

But someone in the administration should have figured this out before announcing an enrollment extension. 

Part D call lines, McClellan speech

Medicare is demanding some strict changes for insurer's call lines:

The call letters also address other issues, such as long waits for drug plans' toll-free phone lines. CMS said drug plans' call centers must answer 80% of calls within 30 seconds, and they must limit calls in which a caller on hold hangs up to 5% or less of total calls. Call centers also must be open whenever pharmacies participating in the PDP's plans are open, even if it is 24 hours a day, CMS said. The agency will issue weekly reports on call center performance. The call letters also said plans should create a "one-stop" area on their Web sites with information on how beneficiaries can appeal coverage decisions. The letter said CMS also "expects sponsors to develop and maintain information systems that accurately process updated enrollment information at least weekly"

Can anyone tell me where else regulations like this exist with consumer help lines?  They seem awfully strict.  Of course, given the disaster when the program first opened, I can see why CMS officials are being so  insistent on

Also, McCllelan gave a great speech last week encouraging more preventative care in Medicare:

McClellan, who visited Detroit as part of an ongoing nationwide tour that began last June, said changes to Medicare should focus on incentives for physicians to promote preventative care. "There's $300 billion in Medicare, and most of that money goes to treating complications," McClellan said, adding, "We could be doing so much more if we put just as much emphasis on keeping people well as we do on treating them." McClellan said Medicare should offer higher reimbursements for lower hospitalization rates and home care that replaces office visits for healthy patients.

Now if he could only get Medicare to adopt some of these changes, I might be a little softer on him in the future. 

What the new numbers say

(cross-posted from tpm)

The Administration released a new report yesterday that it enrolled an additional 1.9 million beneficiaries in Medicare Part D last month, bringing the total number of enrollees to around 27 million.  But the many mechanisms through which seniors receive prescription drugs is deceiving, so I'm going to flush out the numbers a bit further.  (I'm mostly working from this Kaiser issue brief, refer to it if you want to get really in depth.)  Because while 27 million enrollees receive coverage somehow, only 7.2 million of the 22.9 million eligible to voluntarily sign up for coverage have now done so.  And of the 27 million HHs is citing, only 26% of the enrollees  have voluntarily signed up for stand-alone coverage.  Further, the polling on Part D is getting worse.

The first thing you need to know to put these numbers in context is that there are 43 million people eligible for drug coverage under Medicare Part D.  So with the current enrollment numbers, around 63% of Medicare enrollees now have prescription drug coverage coming from somewhere.*
(*somewhere is key here -- 11.1 million enrollees get their drug coverage from a source other than Medicare.)

Next, you have the "dual eligibles" (those enrolled in both Medicare and Medicaid), who were automatically enrolled in a plan.  There are 5.8 million dual eligibles.

More Enrollment Problems

As both Cindy and I have discussed previously, there's reason for concern about Medicare Part D's long term viability if it fails to meet enrollment goals. That's because of adverse selection, which in normal speak means the tendency for sick people to sign up for insurance over healthy people (because they anticipate they'll need it more).  But any viable insurance pool requires many healthy people to off-set the costs of the sick.  With Medicare Part D, seniors who don't take any prescriptions, or only a couple inexpensive ones, won't deem their monthly premium, co-pays, and initial $250 deductible worth paying for.

So far that's been the case.  But low-income seniors who don't qualify for Medicaid can still participate in the drug benefit for no premiums or deductibles and co-pays of $5. And as the Washington Post reported today, even that proposal has a snag:

A $400 million campaign by the Bush administration to enroll low-income seniors in prescription drug coverage that would cost them just a few dollars per prescription has signed up 1.4 million people, a fraction of the 8 million eligible for the new coverage.

   

At this rate, by some calculations, the government is on track to spend about $250 for each person it enrolls, and even then it would have only 2 million poor senior citizens taking advantage of what is perhaps the most generous government benefit available today.

The problem they're running into, of course, is that it's complicated to sign up.  As I often experienced with my work at the Venice Family Clinic in Los Angeles, the largest free clinic in the nation, it can be exceedingly difficult to get patients to sign up for assistance.  With Medicare Part D, these seniors first have to choose from among dozens of drug plans, then they have to pass a series of means tests to get the discounted coverage.

The key is a streamlined process. Anyone who's worked with low-income Americans can tell you that the best way to get people to participate is if you can finish the application in one visit (it's hard to get people to come back again).  Social workers need to memorize the facets of available drug plans for low-income seniors and present them with 3 or 4 options (rather than 10 or 12).  Means testing isn't as easy, which is why it's crucial to use trusted individuals when dealing with sensitive information.

Remarkably, Medicare outlined a program that would have worked much more smoothly, but inexplicably scrapped it for mass-outreach methods:

The council provided a report to Social Security last spring outlining a recruitment strategy that Firman said would have enrolled millions more seniors and cost about $100 per person. They key involves using "trusted intermediaries," such as volunteers at community centers, to work individually with each client, he said. Mass mailings, group meetings and advertising are insufficient when dealing with a hard-to-reach population and an application that involves supplying both income and asset data, Firman said.

Sometimes, it's hard to believe the Administration isn't purposefully trying to make Part D fail.  They're certainly doing a good job accidentally doing so.   

 

Donut holes cost twice as much

(cross-posted from tpmcafe)

Donut hole insurance plans often seem generous because they don't require an up-front contribution to health care every time you see the doctor. Instead, you only pay past a certain point of spending.  But as a recent Health Affairs article by Meredith Rosenthal of Harvard detailed, donut hole deductibles actually end up being twice as large as standard deductibles, increasing both financial risk and out of pocket contributions by patients.

The economic theory goes like this: a standard (aka first-dollar) deductible, like those in high deductible health plans (HDHPs), affects everyone.  Let's say a plan has a $250 deductible.  Each person who spends between $1 and $250 on health care (which will be nearly everyone) will be affected by the deductible, and thus pay more, with an average amount being saved by the insurance company because of cost sharing.  In contrast, consider a donut hole deductible, from $500-$1,000.  In a donut hole plan, fewer people will pay the same average amount of the standard deductible.  That's because the number of people who will spend more than $500 (the donut hole threshold) on health care will be much smaller than the number who will spend between $1-$250 (the standard deductible plan).  In order for the insurance company to save the same amount as the standard deductible, the donut hole must be bigger to capture the same number of people.  How much bigger?  According to Rosenthal, the donut hole will need to be about twice as large to compensate.

This theory holds for the Medicare Part D, and Rosenthal estimated that if the new benefit had a standard deductible instead of a donut hole deductible, the size of the deductible could be decreased by half. 

This design means that although the insurance companies (and the government) will save the same amount of money by actuarial estimates, much greater risk is shifted to enrollees.  That's because those who have the highest costs are now facing an out of pocket payment that's twice as large as a standard deductible.

As Rosenthal notes:

Most beneficiaries will thus perceive that a doughnut-hole policy is more generous than one with a first-dollar deductible, despite the gap in risk protection. This may be the case because although employees and Medicare enrollees should theoretically prefer first-dollar deductibles, they may be more concerned about getting their "fair" share of annual benefit spending than about risk protection. They may also greatly underestimate their risk of having health care spending in the doughnut hole.

The average amount spent on health care usually determines where donut hole deductibles begin.  For Medicare, that was $2,318.  The Part D donut hole starts below this, at $2,250, so a good portion of enrollees will end up paying in the donut hole, many much more than they anticipate.   

It's unclear whether donut hole designs restrain costs either.  Patients may be less likely to restrain spending because they'll have to pay in the future instead of making those payments up-front. 

In any case, we need to think deeply about insurance plans that punish the sickest members of our society. Most people who get into high levels of spending have no control over their illness.  They didn't ask to be ill, and donut hole deductibles saddle them with an out-of-pocket payment that's twice as large because of it.  Is that the moral thing to do?

Upgrading

CMS is upgrading the number of telephone operators to assist with Medicare Part D again, this time from 3,000 to 7,800.  That's after its previous tinkering from 150 to 4,500 (apparently they never got past 3,000).

At the National Health Policy Conference, there was a lot of praise from progressives for Mark McClellan despite his bungling of Medicare Part D's implementation.  But the absolute floundering of Medicare telephone assistance invites deep skepticism of McClellan's competence. 

It's important to add more phone operators, the real problem is that seniors still aren't sold on the benefit itself.  As 53% of seniors polled have no plans to sign up, the Adminstration needs to focus on convincing them that it's in their best interest to buy into a plan.  That's to both avoid financial problems because of unexpected drug costs, but also for the program's long-term viability.  Otherwise it's doomed to adverse selection, and we'll have to start from scratch. 

Fixing Part D

The Senate has set dates for Medicare Part D hearings, and not a moment too soon:

Medicare officials will testify before the Senate Committee on Aging on Thursday about how they are addressing various problems with the Medicare prescription drug benefit, the Washington Post reports. According to the Post, many lawmakers "got an earful" from beneficiaries about the drug benefit while visiting their districts over the winter congressional recess, and they will now consider whether to make legislative adjustments to the program or "wait and see whether the glitches work themselves out." Lawmakers' "big concerns" with the drug benefit include the "dizzying array" of drug plans from which beneficiaries can choose and the "coverage breakdown" for beneficiaries who are eligible for both Medicare and Medicaid, the Post reports.     Next Wednesday, the Senate Finance Committee will address the drug benefit in a follow-up hearing to a meeting last week with committee members and HHS Secretary Mike Leavitt.

The question here is what legislators can come up with for long term viability.  As I discussed over at TPMCafe, not enough seniors have enrolled so far, or are planning to by the May deadline.  But the May deadline isn't the problem -- it's the program itself. 

There are several options, most not very likely and some extremely unlikely.  The grandest option, of course, would  be to repeal the whole thing and  start from scratch.  I think we all accept that's more of a "when pigs fly" kind of likely. 

But what if we changed the legislation to allow HHS to negotiate drug prices?  Ezra summarizes Economist Dean Baker's analysis:

Baker, clever economist that he is, compared Medicare Part D's projected pharmaceutical costs to Congressional Budget Office data on what other countries pay. In 2006, Medicare beneficiaries will spend an estimated $113 billion on drugs. If their costs were equivalent to the next most expensive country, they'd be paying only $86 billion. If they got the prices of the cheapest country, they'd spend $61 billion. And if, as one would expect, they used their larger size to get proportionately larger savings, they'd only spend $42 billion. Over a seven year projection, the standard benefit would cost $1.361 trillion, the high estimate in a single-payer system would cost $834 billion, the middle estimate $602 billion, and the low estimate $418 billion. And those numbers include adjustment for increased drug usage due to lower costs. Add in, too, the $38 billion savings in administrative costs and you've got quite a chunk of money -- in the optimistic estimate, almost a trillion dollars -- the Bush administration passed up on.

So a cool trillion or the program's total collapse?  Unfortunately the Administration, unlike AARP, probably won't be doing an about-face on that policy anytime soon.   I hate to be doomsday about this, but it seems like the only solution we can expect to see right now is an extension on the enrollment date until Dec. 31st, but that won't fix a thing.  Unless we see some kind of turn around in the 2006 elections, the program  is probably doomed.  Premiums will rise, but it will take a few years for it to totally collapse, and take its place  history as one of many failed U.S. health care experiments.

Cross Posting Time

If you haven't dropped by the new TPMCafe Drug Bill Debacle Blog, I strongly recommend you do. We've assembled a great team of posters with some really interesting topics popping up.

I'm still adjusting to this two blogs thing, so I'm going to go ahead and cross-post today's submission over at TPM after the jump.

When drowning, cry "partisan!"

Center for Medicare and Medicaid spokesman Gary Karr is sticking to the Administration's talking points:

"It is disappointing to see this level of partisan politics enter the equation." He said, "The expression we are hearing from nursing homes is generally very positive, but that doesn't mean people aren't having problems. Some have prepared very early for the transition, and they are having even fewer problems."

Not than we can expect anything different, but to suggest nursing homes didn't prepare enough ahead of time, and that's the problem, is flat out lying.  That's because most of the people struggling with getting their medications are so-called "dual eligibles", or people who are enrolled in both Medicare and Medicaid.  Unlike standard Medicare enrollees, dual eligbiles were randomly and automatically assigned to prescription plans.  70% of nursing home residents are enrolled in Medicaid (and the vast majority of those are elderly, and thus enrolled in Medicare).  As this New York Times article reports, all the preparation in the world won't help when the government keeps changing its mind, doesn't enroll the people it's supposed to, and allows private companies to decided which drugs should be covered:

Lights burn way past business hours at Sarah Neuman, where six months of preparation, including a new computer system, has proven all but useless. Clarifications arrive from the federal government faster than even a team of professionals can keep up with them.

''Nobody at the moment understands what they're doing, and not for lack of trying,'' said Elaine Healy, the medical director at Sarah Neuman, the smallest of three campuses of the Jewish Home and Hospital Lifecare System.

The first priority for the beleaguered staff at Sarah Neuman is figuring out what happened to a group of residents, now whittled down to 26, who should have been assigned a plan but fell through the cracks. Next they must assess the random assignments of residents to plans, decide whether to appeal the drugs not covered, prescribe different ones or switch plans.

This isn't bad government, this is bad plan design.  Refer again to Jon Cohn's article on the unbelievably smooth roll out of Medicare in 1966.  Remember, as well, that Medicare was the first time everyone over 65 had government-guaranteed access to doctors and hospitals -- substantially more complex than adding a prescription benefit.  Legislators have made every aspect of this bill, from its choice (52 plans in some areas for Medicare enrollees) to its non-choice (dual eligibles being randomly assigned plans), a labyrinth. 

Lobbying and Part D

I know I've done a lot of pharma bashing lately, but this is just so messed up (from Krugman):

Consider the career trajectories of the two men who played the most important role in putting together the Medicare legislation.

Thomas Scully was a hospital industry lobbyist before President Bush appointed him to run Medicare. In that job, Mr. Scully famously threatened to fire his chief actuary if he told Congress the truth about cost projections for the Medicare drug program.

Mr. Scully had good reasons not to let anything stand in the way of the drug bill. He had received a special ethics waiver from his superiors allowing him to negotiate for future jobs with lobbying and investment firms - firms that had a strong financial stake in the form of the bill - while still in public office. He left public service, if that's what it was, almost as soon as the bill was passed, and is once again a lobbyist, now for drug companies.

Meanwhile, Representative Billy Tauzin, the bill's point man on Capitol Hill, quickly left Congress once the bill was passed to become president of Pharmaceutical Research and Manufacturers of America, the powerful drug industry lobby.

That's not including Mark McClellan, secretary of the Center for Medicare and Medicaid Services (CMS) whose former job was as an economist, and whose brother Scott is our beloved Press Secretary. 

Hindsight is not only 20/20 -- it's depressing

Jonathan Cohn has penned a smart piece examining the difference between Medicare's official beginning in 1966 and Medicare Part D's voyage into the world. 

Another difference between the two administrations is their willingness to take initiative. Last year, experts repeatedly warned the Bush administration that it had inadequate contingency plans in place, culminating in a December Government Accountability Office report that predicted with eerie accuracy exactly what has happened at pharmacies around the country these past two weeks. LBJ's team was far more cautious. Although confident that hospitals could handle any potential surges, it still drew up plans for transferring patients to overflow facilities, even lining up helicopters in Texas to provide speedy transport.

There were helicopters ready for the opening of Medicare.  Nevermind a category 5 hurricane predicted to come ashore for a few days.  It's painfully sad to draw this comparison.

Truly, LBJ was a different species than Bush, but there's a powerful meme in connecting these events.  This mess isn't Government's fault, it's the Bush Government's fault.  Just like the war, just like the hurricane -- planning is inadequate, unqualified individuals are put in positions of great influence and power, and the public suffers. 

I joked about it yesterday, but CMS officials decided that 150 phone operators would be sufficient for pharmacies' questions.  There's more than 150 insurance plans!  Yesterday they corrected that mistake and upped the number to 4500.  Any idiot could have told you that 150 operators for something as major as the drug benefit was grossly inadquate. 

It didn't have to be this way.  But with every road it laid on the way to the the benefit, the Administration made sure it left a little bomb. 

First, over a dozen plans could be offered in every state, and those plans can cover whichever drugs and pharmacies they see fit -- boom!

The government can't negotiate with drug companies, ensuring high prices and billions in wasted money for tax payers -- boom!

Pass a benefit, thereby ensuring all efforts to reimport drugs from Canada will be deemed unnecessary -- boom!

Decide 150 operators are sufficient to deal with the first two weeks of enrollment -- boom!

Let states become responsible for picking up the slack when thousands of people can't get their medications, and refuse to reimburse them for doing so -- boom!

It's no wonder this road is in shambles. 

In the end, we all suffer.  Because our taxes are paying for this -- our money is being wasted.  Cohn points to who's actually suffering here:

Worse yet, the majority of these people are so-called "dual eligibles," meaning that they are not only old and sick but also poor--in other words, exactly the kind of people who are most dependent on drugs and least able to afford them on their own.

Whether it's in the military without enough body armor, dying of dehydration and lack of medical care in the super dome, or being denied medications because of completely preventable glitches, it's the same people who are paying for these mistakes, over and over.

How do I want to mess you up, Part D? Let me count the ways...

Then: Decide having only 150 operators is adequate to deal with pharmacies' eligibility questions

Now: Oops! Actually 4,500 seems like it might work better

Then: Designing a drug benefit where "benefit" = $$$ for pharmaceutical companies

Now:  HHS secretary declares the benefit will be instated "One pill at a time,":

Leavitt added, "When there's change, there's an opportunity for things to go wrong. We are fixing them one pharmacy, one beneficiary at a time"   Leavitt and CMS Administrator Mark McClellan said "tens of thousands" of low-income beneficiaries have experienced problems obtaining drugs (USA Today, 1/18). "We are likely to see these problems on an ongoing basis until everyone has used their card at least once,"

Then: Witnessing the disaster unfolding, states come to the rescue!

Now:  The fed could care less -- they won't reimburse the states a cent!

The federal government will not reimburse states that are covering the cost of prescription drugs for Medicare beneficiaries who are unable to obtain medications under the new drug benefit. . . McClellan said, "Under this program, [CMS doesn't] have the authority to pay states directly," adding, "People are in Medicare drug plans and it's the Medicare plans that are supposed to pay for the medications"

Then: Medicare Part D will open smoothly, no problems expected

Now: We're going to go temporarily single-payer and require that insurers cover a 30 day supply for all prescriptions taken before the benefit. 

Yes, Medicare, Bush loves you.  It might be tough, but it's love.

Predictable in more ways than one

Here at Healthy Policy, I like to point out that the Medicare Part D mess was entirely predictable based on the terrible policy design.  Well, according to some documents Jonathan Cohn dug up, our own government predicted just how bad it might get:

But one tidbit I came across in my research seems worth sharing now.  It's a Government Accounting Office report, issued in December, warning that the Bush administration hadn't done enough to make sure the most medically and financially vulnerable Medicare beneficiaries could actually get their drugs

Progressive policy wonks need to keep pounding the "there was a better way" and "this is what you get when Pharma writes legislation" drums.  This legislation was so poor that our own GAO felt compelled to issue a report warning of the coming mess.  That, and it made the Bush Administration temporarily go single-payer. 

Between this and Maryland's Walmart bill, it's great to see health insurance issues get back in the limelight.  But if State of the Union predictions are correct, and Bush unveils HSA's as his centerpiece, progressives have to be ready.  Medicare Part D illustrates how easily Republicans coopt liberal iniatives and turn them into disasters.  This time we'll have it as ammunition:  Don't let your insurance go the way of the Medicare Prescription Drug Benefit!

What Happens When You Design Horrid Policy

From the New York Times:

With tens of thousands of people unable to get medicines promised by Medicare, the Bush administration has told insurers that they must provide a 30-day supply of any drug that a beneficiary was previously taking, and it said that poor people must not be charged more than $5 for a covered drug.

The actions came after several states declared public health emergencies, and many states announced that they would step in to pay for prescriptions that should have been covered by the federal Medicare program.

Nice how disastrous policy is what finally gets the Bush Administration to go single payer. Too bad it's only temporary.

Again, I can't stress enough that this situation was completely avoidable. It was also completely predictable. When you design a benefit that makes seniors (who aren't particularly adept at using the internet) choose between dozens of plans, covering hundreds of different drugs, participating at a handful of pharmacies, you get chaos. And chaos prevailed.

Update: Health Care Renewal has a laundry list of Part D problems worth checking out.