[IP] The Deadly Doughnut
Begin forwarded message:
From: Dewayne Hendricks <dewayne@xxxxxxxxxxxxx>
Date: November 13, 2005 6:07:14 AM EST
To: Dewayne-Net Technology List <dewayne-net@xxxxxxxxxxxxx>
Subject: [Dewayne-Net] The Deadly Doughnut
Reply-To: dewayne@xxxxxxxxxxxxx
Mike:
You still want me to send you all of Krugman's columns?
-- Dewayne
November 11, 2005
Op-Ed Columnist
The Deadly Doughnut
By PAUL KRUGMAN
Registration for Medicare's new prescription drug benefit starts next
week. Soon millions of Americans will learn that doughnuts are bad
for your health. And if we're lucky, Americans will also learn a
bigger lesson: politicians who don't believe in a positive role for
government shouldn't be allowed to design new government programs.
Before we turn to the larger issue, let's look at how the Medicare
drug benefit will work over the course of next year.
At first, the benefit will look like a normal insurance plan, with a
deductible and co-payments.
But if your cumulative drug expenses reach $2,250, a very strange
thing will happen: you'll suddenly be on your own. The Medicare
benefit won't kick in again unless your costs reach $5,100. This gap
in coverage has come to be known as the "doughnut hole." (Did you
think I was talking about Krispy Kremes?)
One way to see the bizarre effect of this hole is to notice that if
you are a retiree and spend $2,000 on drugs next year, Medicare will
cover 66 percent of your expenses. But if you spend $5,000 - which
means that you're much more likely to need help paying those expenses
- Medicare will cover only 30 percent of your bills.
A study in the July/August issue of Health Affairs points out that
this will place many retirees on a financial "roller coaster."
People with high drug costs will have relatively low out-of-pocket
expenses for part of the year - say, until next summer. Then,
suddenly, they'll enter the doughnut hole, and their personal
expenses will soar. And because the same people tend to have high
drug costs year after year, the roller-coaster ride will repeat in 2007.
How will people respond when their out-of-pocket costs surge? The
Health Affairs article argues, based on experience from H.M.O. plans
with caps on drug benefits, that it's likely "some beneficiaries will
cut back even essential medications while in the doughnut hole." In
other words, this doughnut will make some people sick, and for some
people it will be deadly.
The smart thing to do, for those who could afford it, would be to buy
supplemental insurance that would cover the doughnut hole. But guess
what: the bill that established the drug benefit specifically
prohibits you from buying insurance to cover the gap. That's why many
retirees who already have prescription drug insurance are being
advised not to sign up for the Medicare benefit.
If all of this makes the drug bill sound like a disaster, bear in
mind that I've touched on only one of the bill's awful features.
There are many others, like the clause that prohibits Medicare from
using its clout to negotiate lower drug prices. Why is this bill so bad?
The probable answer is that the Republican Congressional leaders who
rammed the bill through in 2003 weren't actually trying to protect
retired Americans against the risk of high drug expenses. In fact,
they're fundamentally hostile to the idea of social insurance, of
public programs that reduce private risk.
Their purpose was purely political: to be able to say that President
Bush had honored his 2000 campaign promise to provide prescription
drug coverage by passing a drug bill, any drug bill.
Once you recognize that the drug benefit is a purely political
exercise that wasn't supposed to serve its ostensible purpose, the
absurdities in the program make sense. For example, the bill offers
generous coverage to people with low drug costs, who have the least
need for help, so lots of people will get small checks in the mail
and think they're being treated well.
Meanwhile, the people who are actually likely to need a lot of help
paying their drug expenses were deliberately offered a very poor
benefit. According to a report issued along with the final version of
the bill, people are prohibited from buying supplemental insurance to
cover the doughnut hole to keep beneficiaries from becoming
"insensitive to costs" - that is, buying too much medicine because
they don't pay the price.
A more likely motive is that Congressional leaders didn't want a drug
bill that really worked for middle-class retirees.
Can the drug bill be fixed? Yes, but not by current management. It's
hard to believe that either the current Congressional leadership or
the Mayberry Machiavellis in the White House would do any better on a
second pass. We won't have a drug benefit that works until we have
politicians who want it to work.
Weblog at: <http://weblog.warpspeed.com>
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