Medicare Drug Nightmare—A Golden Gift to Insurance Companies

Nov 21, 2005

Medicare Part D, the new drug insurance program for retirees, starts in January. About 40 million people on Medicare are eligible to sign up. But when enrollment started on November 15, many retirees were confused and frustrated. They found that instead of a plan with standard coverage, premiums and co-pays, they had to choose from among dozens of different plans offered by different companies covering different sets of drugs with different premiums, deductibles and co-pays. In most states, at least 30 or 40 different plans are being offered; in some states far more. In Michigan, 78 different plans are being offered by 18 companies.

The problem is that rather than creating a fund out of which all retirees’ drug bills will be paid by the government, the program will subsidize individual drug insurance policies that retirees can buy from private insurance companies, all looking to make a profit on their different policies. Also, no pharmacy participates in all the plans. So if a retiree wants to use a particular pharmacy, they also need to know which plans their pharmacy participates in.

Not only does this profusion of plans make it difficult for retirees to know which plan is the best for them, it also wastes billions of dollars. Each company will spend millions of dollars on advertising and each will make millions more on setting up and running a system to process just its own claims. The program will work like other private health insurance programs in which administrative expenses are four times more than what they are for Medicare Parts A and B.

Bush and other politicians have called the new drug insurance program for retirees the greatest improvement in Medicare since it was first started. In reality, it will be a bigger fraud than what Enron perpetrated, providing expensive, incomplete and confusing coverage to tens of millions of people. But for the private insurance companies, it will be a golden dream come true.