Most of us don’t pay much attention to Medicare. We may notice that money is taken out of our paychecks to pay for our future Medicare coverage. We may have heard that Medicare has financial problems. We might have heard our parents or grandparents talk about Medicare. But if you are interested in how John McCain’s individual private health plan proposal would work, it’s worth taking a look at the Medicare drug benefit. The Medicare drug benefit exemplifies the problems of a private health insurance model.

The doctor and hospital part of Medicare is a private-public partnership. Most people with Medicare can go to any doctor or hospital they want, any where in the country, without a referral. The doctor submits a claim to a private insurance company that review claims, and the claim is paid under standards developed by the federal government. The benefit is basically the same across the country, for everyone, regardless of their health status or the amount of health care they use.

The Medicare drug benefit that went into effect in 2006 is different. It is operated only through private insurance companies that compete in the market place for enrollment by Medicare beneficiaries. The federal government reimburses the companies, but each company gets to decide what drugs to cover and what restrictions to put on those drugs before covering them. Congress set up a standard drug benefit with a deductible and cost sharing and a gap in coverage where people must pay the full cost of their drugs until they have spent enough for catastrophic coverage. The key is that the private companies are free to offer drug plans that change the standard benefit..

What all this means is that Medicare beneficiaries have more choices, with more variables, than they know what to do with. And, even after they choose a Medicare drug plan, they have to review it annually during open enrollment (November 15 - December 31) because plans change their benefits every year in response to market forces, i.e., profit.

Pennsylvanians have always had the most choices of private Medicare drug plans. For 2009, there will be 57 separate drug plans, down from 63 in 2008 and 67 in 2007. (This doesn’t include the Medicare HMOs that also offer drug coverage.) Again, these plans look different from each other, and they look different from the drug plans offered last year and the year before. For example, 46 of the drug plans will have a premium increase over last year. Premiums are going up on average by 20% for 2009, way more than the increase in premiums for employer-sponsored insurance. Cost-sharing for covered drugs also is increasing. The percent of plans that offer a $0 deductible has dropped from 62% in 2007 to 54% in 2009.

And if you look at how plans change their benefit each year, you can see how they try to avoid enrolling people who will cost them the most money. It stands to reason that people who fall into the gap in coverage are the people who use the most drugs and therefore the most costly to ensure. Most drug plans don’t offer coverage for any kind of drugs in the gap, meaning that people who use a lot of drugs have no drug insurance for part of the year. The percentage of drug plans that do offer some kind of coverage in the gap has declined from 29% in 2007 to 23% in 2009. The average premium for plans with gap coverage rose from $36.80 to $51.50.

The other expensive group of large prescription drug uses are people with very limited incomes and resources. They can enroll in plans referred to as “benchmark” plans and pay no premium, have very low co-payments for drugs, and continue to receive drug coverage while in the gap, and the government pays the difference. Only 9 of the 57 Medicare drug plans that will be available in Pennsylvania in 2009 qualify as benchmark plans. That’s half the number that were qualified in 2008. It’s just not profitable to insure people who need prescription drugs, even when Medicare pays you more to insure them.

From a business perspective, the market works well for the Medicare drug benefit. A large number of plans want to compete in Pennsylvania, and the plans can redesign their benefits each year to maximize their profits and keep out undesirable customers. From the perspective of Medicare beneficiaries, the market creates too many choices that change too frequently and that push more costs onto them each year.

Take a careful look at the Medicare prescription drug benefit. Do you want to choose among 57 different private health insurance plans each year? Do you want a system where money gets paid directly to the insurance company regardless of whether the benefits being offered will really help you when you are sick? Do you want to see your share of your health costs continue to go up, unchecked, as they have for the past decade? Then the McCain health plan is for you.