By Dennis Byron
Fellow senior citizens, you might have seen news releases recently from the Obama administration’s Health and Human Services (HHS) department and its political allies with claims such as:
•“As we move forward, we will close the doughnut hole completely, and save even more money for everyone with Medicare,” said HHS Secretary Kathleen Sebelius.”
•“When the Medicare Part D program was created, there was a gap in coverage, where most beneficiaries would pay 100 percent of their drug costs while still paying their premiums,” according to an article in the Los AngelesTimes.
•…closing the Medicare prescription drug coverage gap, often called the “donut hole,” will lower costs for beneficiaries who otherwise would have been required to spend thousands of dollars out of their own pocket for their prescription drugs
•“By 2020… Typical Medicare beneficiaries will save an average of nearly $4,200 from 2011 to 2021.”
Like me, you probably thought “That’s sounds too good to be true.”
So — being a retired senior and not a fan of winter golf — I read the HHS report behind the rhetoric and talked via email to the author of the report and the author of its underlying research, who is a non-political U.S. government actuary.
You and I were right. It’s too good to be true.
“Save” means something different to HHS than it does to us seniors. Did you ever have a poker buddy who – when you asked him “How much did you win tonite?” – always counted the money in the pots he won but never counted the money he anted up and used to cover a few bets or even raise, if he then had to fold that hand?
That’s sort of the way HHS counts “Medicare savings” in its press releases. In the huge “average savings” numbers HHS released recently, it hyped some huge possible estimated “savings” over the next 10 years for those of us on Parts A and B Medicare/Medigap but HHS did not count the already legislated $200-billion-plus cost hits that us Part C Medicare subscribers will experience over the same time period. There are 25 percent of us on Medicare Part C that HHS conveniently left out of the calculations, forcing readers of the report to follow a bunch of footnotes and links and do the calculations themselves. When you count all of us seniors to get a true average, it turns out to the so-called “average savings” for the next 10 years almost vanish. For HHS to say you will save around $4200 on average but not also tell you that you will spend around $3200 on average is the kind of counting that old poker buddy would love.
[This article is too short to go into all the implications of these already legislated $200-billion-plus Part C budget cuts, changes to insurance such as Tufts Medicare Preferred or Fallon Senior Plan in Massachusetts — also known as Medicare Advantage. My first inclination is to just suggest that other seniors switch to Part A and B/Medigap but the Obama administration has also proposed legislation reducing Medigap benefits. If that legislation passes, seniors’ out of pocket (OOP) Medicare costs are going to go up a lot more no matter which type of Medicare insurance we like. To be fair to the president, Republicans are proposing similar changes to Medigap.]
In fact when it comes to all OOP costs for us seniors, the HHS is even more confusing in its material. When HHS says “savings,” it means savings to the Medicare funds. That is not the same as OOP savings to us “typical Medicare beneficiaries.” For example, when HHS talks about Part D “donut-hole savings,” it’s also counting money that State Pharmaceutical Assistance Programs (SPAPs) do not have to spend, which in some states could be most of the donut-hole spending. I’m happy to see savings any way it happens but it’s misleading to us senior citizens for HHS to pretend that the savings mean money in our pockets.
Most important, my reading showed me that donut-hole “savings” definitely does not mean savings for “everyone with Medicare” or that the donut hole ever meant “most beneficiaries would pay 100 percent of their drug costs.” Those statements are just plain outright poker-player bluffing by Ms. Sebelius and her political associates. When you look at donut-hole statistics (see the below illustration, with bars broken out by millions of Medicare beneficiaries) for “everyone with Medicare” nationwide, it turns out that 25 percent of us or so do not even take Part D, 45 percent of us or so take Part D but do not fall into the donut hole, and 20 percent or so receive Extra Help/LIS and cannot fall into the donut hole. That leaves less than 10 percent of us that are affected by all this HHS political bluffing.
If you live in Massachusetts and are part of that small group, you most likely qualify for our state’s SPAP, called Prescription Advantage. (You qualify if you have individual retirement income less than $55,000 a year. There is no asset test. Rules differ for married couples.) With Prescription Advantage, depending on exact income level, you’re more or less protected from all or most of the effects of the donut hole. Make sure you check the SPAP rules in your state.
And finally HHS really only means “savings” versus what some Medicare beneficiaries might have spent otherwise, not that you will actually spend less money. That doesn’t really bother us seniors. We’ve been around the block a few times and we understand that prices always go up. But HHS should make that clearer.
There is some good news behind the unclear HHS numbers and terminology. It is true that some drug prices are dropping, and more and more of us seniors are asking our doctors for generics. That’s probably why so few of us fall in to the donut hole in the first place and about 10 percent less of us hit the donut hole in 2011 than hit it in 2010. Also, some previously expensive brand-name drugs such as Lipitor are going generic.
And it is true that the donut hole is going away. But going away means something different to me than being completely closed. In other words, unless the Medicare laws change again, after 2020, tiered co-insurance will apply to all brand-name drugs replacing the current pharmaceutical company discounts for some spending. Drug prices could go up or insurers could even drop certain brand-name drugs from their formularies. This all means that if you are one of the few who unfortunately otherwise would have been required to spend thousands of dollars out of their own pocket, unfortunately you will still have to spend thousands. That spending doesn’t completely go away as you may have thought. The “otherwise” in the HHS material is very misleading.
In fact in my opinion everything in the HHS press release is misleading senior citizens. I hate to see this politicization by HHS of something so important to us seniors. But I also know senior citizens are smart enough to know when someone’s using marked cards.
Dennis Byron is a retired market researcher living on Cape Cod with the emphasis on retired.
