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Study: Seniors Overspend On Medicare Part D

By Ankita Rao

October 11th, 2012, 9:22 AM

Seniors spent on average $368 more than they needed to on drug coverage through Medicare Part D plans in 2009 — their decisions complicated by the sheer volume of plans available and difficulties involved in determining what makes a plan a good choice, a Health Affairs study released Tuesday has found.

There are 1,736 plans available to Medicare beneficiaries for purchasing prescription drugs through Medicare’s Part D program, and, based on 2009 data, that’s about 50 plans per region.

The study authors  found, though,  that only 5.2 percent of Medicare recipients chose the most economic Part D plan available. This happened despite video tutorials, online materials and printed information guiding seniors to choose an appropriate plan.

Chao Zhou, a co-author of the study and a postdoctoral researcher at the University of Pittsburgh, said that the experiences generated by Medicare Part D’s market-based approach could guide the next steps in health care.

For instance, its lessons could be applied to the health law’s insurance exchanges – marketplaces in which people who qualify for subsidies could easily compare plans and costs as they purchase insurance, according to the study.

“In general this market approach is a good thing, but when there are so many options, we need seniors to choose a better plan,” Zhou said.

Co-author Yuting Zhang, who is a University of Pittsburgh associate professor, said that plan choices weren’t affected by how sick a patient was or if they had mental disorders. The study did show, however, that excess spending increased with age and varied by location.

The tendency of beneficiaries to “overprotect themselves by purchasing plans with relatively generous features” was also one of the main drivers of excess spending. The authors wrote that some seniors looked past their medication needs to choose plans with low deductibles, and ended up with higher premiums.

Zhang suggested more targeted government assistance might help Medicare recipients better choose their plan. “If they are able to choose their plans, we could rely on a private market to drive down costs,” she said.

But one health care advocate said that the tools for choosing the cheapest option already exist on the official website.

“There’s so much out there for people to access information,” said Julie Bennett, a community outreach specialist for HICAP, a Sacramento-based health care counseling and awareness program that is part of the volunteer-based group, Senior Advocacy Services.

Bennett, who regularly talks to seniors in northern California about Medicare, said that beneficiaries received ample information in the form of government-distributed “Medicare and You” books, and an online video tutorial. She said most of the people she counsels, including those living under the poverty level, knew how to access materials on the Internet.

But Bennett also said that the number of variations in each Part D plan was a confusing obstacle to their Medicare choices.

“It’s complicated, and every individual has a different situation,” she said. “We have to make sure the person we’re helping understands their situation is probably unique.”

7 Responses to “Study: Seniors Overspend On Medicare Part D”

  1. samson p. says:

    What now? Republicans are going to blame seniors for writing themselves too many scripts? Republicans are going to blame seniors for always writing themselves scripts for brand named drugs when a perfectly good generic exists? That’s bull! Who prescribes medicine? Certainly not seniors! Fact is, my doctor would not write a script for a generic drug if his life depended on it! For most docs in America, writing scripts for generics is against their religion. For most docs in America, writing scripts for generics is simply not in their DNA. Pharma, doctors and insurance companies, all of them collude and conspire to keep the gravy train rolling by writing scripts for the most expensive brand named medicines when a perfectly good generic exists. Doctors don’t get graded for what they prescribe and when they prescribe it and they should! My doctor always has at least one Pharma representative in his waiting room. Why? Because the perks are so great! I said it before and I’ll say it again, if Willie Sutton ever knew there was so much easy money in healthcare, he would have never robbed banks! Shysters! Nothing but greedy shysters!

  2. louise a says:

    And this is the same reason a voucher Medicare program will not work. Add in the number of seniors with vision and hearing problems that make reading, using the internet and automated phone systems nearly impossible and you have a recipe for disaster. And of course there are also so many people who have such a low health literacy level that it is just not right to ask them to make these decisions.

  3. John Pepe says:

    There is a great Part D plan finder on http://www.Medicare.gov site. I recommend to all my client to visit this site. Then they can without an agent look at which plan will cover all their medications and what the cost will be. Then they can enroll or contact their agent.
    It only takes 10 minutes and you will know for your exact zip code the total cost for your medications for 2013.

  4. Max Herr says:

    Well, put much of the blame on Medicare and its marketing restrictions. I would venture to say that a significant percentage of the pre-baby boomer generation do not have Internet access in order to visit the Medicare.gov website on their own. This percentage will surely shrink over the next decade as the baby boomers enter retirement with better tech-savvy. Many of these folks who do business with the same agent for homeowners and auto, are not doing business with an agent who represents one or more insurers who offer Medicare Supplement, Medicare Advantage, or PDPs.

    Agents like myself can no longer go out and actively “prospect” for senior clients — whether Medicare Supplement or Medicare Advantage or a stand-alone PDP. It has become an entirely passive/responsive activity — you cannot hold educational seminars at Senior Centers if the location serves meals, you can’t work referrals, you cannot make those dreaded “cold calls” to potential clients. Everything must be inbound. You can put an ad in a newspaper or magazine and wait for the phone to ring. You can send out those god-awful mass mailers and hope you get a few replies. You can ask folks to have their senior friends call you for information. You can try setting up shop in a WalMart store or parking lot, for example, but all you can do there is pass out information . . . and wait for people to contact you . . . no “sign ups” on the spot.

    While the laudable objective was to prevent unscrupulous persons from coming in contact with seniors and their money, the unintended consequence is that seniors who desperately need assistance don’t know where to find it, and are probably waiting for someone to contact them . . . which may never happen . . . because they are just as likely to toss those mass marketing flyers in the trash as open them and read what they say.

    Agents are the persons most likely to have an answer to the question, “Which plan will save me the most money?”

    The study may also only be looking at stand-alone PDPs. I don’t “do” those. I represent several major MA-PD HMOs and PPOs, and so I’m guiding clients based on overall out of pocket expenses, of which their drug expense is a significant consideration, but not the only one. And here in Southern California, where most MA-PD plans are “premium-free”, the various tweaks each insurer applies to other out of pocket costs must be factored into the solution — you cannot simply say, “Well, this plan has the lowest drug cost” when you also know it has the highest out of pocket expense for hospitalizations. These are factors which must be evaluated in a holistic manner.

    The Medicare/PDP waters are too murky and too complex for the vast majority of people — including insurance agents — to navigate successfully. And the HICAP programs, with their “specially trained volunteers” don’t always provide the best service — even though it’s free. When I first recommended the MA-PD PPO (in Oregon) my mother has been on since 2007, and suggested that she contact the HICAP agency for their evaluation of the plan, they didn’t even know it existed at the time. So what’s a person to do?

    As good as the MA-PD plans are nationally, if Medicare Advantage is done away with, as the Democrats are suggesting (because they don’t like insurance companies getting any money), seniors will certainly have their difficulties with the otherwise bankrupt Medicare system.

  5. Carol Moore says:

    Thank you, Max! THE RESTRICTIONS OF CMS ARE STIFLING!!! They work to harm the seniors much more than they help them. Technically if the seniors don’t ask the right question, we as agents are NOT supposed to answer it!!! & Most seniors I visit, do NOT have a computer in their home!

    The Part D cost to the Federal Government is coming in 20% below projected amounts because of competition! Competition does work! This is proof a voucher type system WOULD work!!!

    I find the statistics presented in this article too single minded. It might be true that people spent more than they needed to for their coverage but remember – cost is only one factor in making a decision. (Hind sight is 20-20. ) Willingness & ability to absorb risk is another. Unless you are close to Medicare age, you will not realize the fear factor involved in the decision. Fear of huge costs if you require a costly medication perhaps to stay alive, in the middle of the year weigh on our elderly a lot. There are many factors besides just cost when correctly guiding a senior to the right PDP for them.

  6. MN Agent says:

    There are lessons to be learned from this story. Top lesson: Health Exchanges are not going to help most people decide on plans that are going to optimize thier cost. Exchanges will just make it possible for everyone to blame themselves for a less than perfect choice.

    Medicare.gov is an Exchange for Medicare health and drug plans. The results speak for themselves. Only one in twenty are picking the “optimum” plan.

    When ObamaCare is implemented there will be mandated health exchanges same as Medicare. To do the same thing and expect different results, is the working definition of insanity. At least people will be able to take responsibility for thier “choice”.

    Meanwhile, professional and qualified help for people needing to consider health insurance options is being chased out of the market. Logic being, no one will need an agent once the Exchanges are up and running.

    A single health insurance policy is a pretty complex agreement covering dozen and dozens of pages. So comparing just two plans could leave you studing hundreds of pages of information. Yet, Health Reform want it all boiled down to a few computer screens. So that’s how Americas are suppose to choose?

    It just does not make sense.

    Oh but wait, there will be Navagators to replace the agents. Even though goverment can not tell you what a “Navagator” is or what they are suppose to do, that is who people are suppose to go to if the need help “navagating” the “exhange”.

    Ambiuous to say the least. Well, it is not working for Medicare Part D is it?

    Well it will be hard to find an agent to help you find the right policy in 2014 because most of the good ones are going or are already gone. I used to work with healht insurance clients to write about 5 to 8 health applications per week, getting about 95% approved. Pretty impressive results for my clients and my business.

    I have had to face the economic realities of the changing market. In order to justify the time I spend through underwriting to placement, I need about two years to recoup cost. ObamaCare is suppose to be implemented in 2014. Simple math, there are not two years left to recoup cost.

    I now only do health insurance on a referral basis for my current clients. I just can’t go looking for people to help anymore. Since I have shifted focus away from health insurance, I write 2 or 3 policies per week. Yet so many people need help. I would be out of business if I pursued the business any more.

    There is a chance that Health Reform will create opportunities for agents once people see that “Exchanges” and “Navagators” will not offer the same level of service or results my advice as an agent provides. However, there is nothing currently know about “Exchanges” and “Navagators” that one could based a business plan. So I will wait and possibly adjust once the market responds.

    Good luck to all of you needing help. My prayers are with you.

  7. Ruth Laudan says:

    If the rules were not such as they are, an agent could go into medicare.gov and put the individual’s prescriptions in the medicare website and help the senior find the drug plan that best fits the meds they are taking. Of course if the doctor changes the senior’s meds during the year, that plan might not be the best fit for the new meds, however the senior can change plans each year and get a plan that does help with the cost. Each Plan D has different criteria and cost for the drugs. In fact I encourage seniors to put their meds in the medicare.gove website each year to help them get the best option for them for that year. The system is not set up so the agent can help the senior in this way, their hands are tied to do the best job for the senior.

    As for exchanges,it is my understanding that an agent cannot offer exchange plans. In fact I am not sure the exchanges will be handled by licensed agents. I have been told I cannot be a part of an exchange and be an agent too. So I am not sure what kind of help people will be getting from exchanges. I guess there might be people better qualified to help individuals than licensed agents.

    As for doctors and pharmacies taking advantage of people with their meds, I think that is not necessarily so. In my experience as an agent, most doctors are changing their patients meds to generic unless there is some medical reason they do not think the particular generic drug is doing for the patient what a name brand will do. At any case to get a brand name approved, the doctor has to make a request in writing to the drug company and it has to be approved.

    The person who wrote this article is not taking into account that each person can put their prescriptions into the medicare.gov website and find out which plan in the course of the year will cost less based on the particular meds they are taking. That is not always the cheapest plan. In many cases the people who get into the cheapest plans are the ones who take nothing. They do this so they will not get penalized for not having a plan.

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