An F for Medicare D

Fictional scene: large number of politicians, policy experts and lobbyists sitting around a conference table. The Washington Monument can be seen in the background.

Politician 1: “We’ve got to keep our campaign promise. Let’s come up with a prescription drug plan for everyone even though most don’t need it. Let’s make it very confusing and more expensive than necessary.”

Lobbyist: “And let’s support the insurance and pharmaceutical industries by ensuring we don’t take advantage of bulk purchasing discounts.”

Sounds crazy doesn’t it, but that’s exactly what’s happened with Medicare D.

Medicare D could have been a great benefit to those seniors lacking prescription drug coverage. It should have been a federal program, like the original Medicare instead of a privatized arrangement. And millions more seniors would have enrolled and benefited had it been simple to understand.

But alas, that didn’t happen. The program was offered instead to all 43 million seniors and disabled Americans even though 60 percent had other coverage and didn’t need it. Worse still, Medicare D was offered through a myriad of private health insurers – giving the average senior a dizzying 30 different plan options.

The most frustrating aspect of Medicare Part D to me is the total disregard for volume purchasing. The Feds couldn’t schedule a little time to talk with Wal-Mart about the power of buying in bulk? Can you imagine how many pills 43 million seniors and disabled Americans take? Wouldn’t it make sense to buy as many pills as possible from the fewest number of providers? Of course it would. Can you imagine the savings?

However, the fragmentation of Medicare D guarantees that the pharmaceutical companies can instead charge each health insurer premium prices for plan drugs. Everyone pays more: the government (meaning all of us) and the enrollees.

Finally, until Medicare Part D is fully operational, the federal government is subsidizing the program for the next two years and paying each health insurer to participate as an incentive to offer more choices for enrollees. Here’s a prediction: after the subsidies end, the health insurers with low numbers will just fold up their Medicare D tents and go home.

So what’s an employer’s role in Medicare D? First, you need to make sure your retirees understand the Medicare D program so they can make the most informed decisions about plan options. Also, each retiree needs a copy of a Certificate of Creditable Coverage which documents that they have been covered by an employer-sponsored plan.

This certificate is an important piece of paper. If retirees decide at a later date to opt into Medicare D, the certificate’s documentation will prevent them from being charged a penalty for late enrollment and will prove they have had continuous coverage.

The bottom line with Medicare D: it didn’t have to be this way!