I know all of the method nonsense about cards and such. My question is about the logic that created such a bizarre system. I buy a policy/card from some company and I get a reduced rate for some medicines but not others. Or I go online and print a state card (anyone gets the cards, you just print them) that gives me significant discounts on some medicines, but I can’t use the state card and another to buy two different medicines on the same trip to the Pharmacy.
The pills are on the shelf at the Drug Store. The company that issues the card is not a manufacturer or even a stocking distributor. They do not participate in the supply chain. The state is not involved in any of way. But the price of the pills that are coming out of the same bottle depends on some card the purchaser has in his or her wallet.
That doesn’t sound like Medicare – or Medicaid, for that matter. Medicare Plan D is only for people who are otherwise on Medicare. Certainly neither Medicare nor Medicaid works on a system of “anyone gets the cards, you just print them.”
What you’re describing sounds like one of those discount cards. They’re basically just coupons. You go to one of the pharmacies they name, and the pharmacist agrees to give a discount on that specific drug because you went there instead of some other pharmacy.
Kunilou has it exactly right. Medicare is health coverage for people over 65 or with a disability or end stage renal disease. Medicare Part D is the prescription drug component of Medicare.
I would be happy to try to explain what you want to know about Part D, but I don’t understand the question. The rationale behind Part D was that before it was enacted, there was no prescription drug coverage in Medicare. So, it was added. Is that the question?
Don’t confuse a state Plan D like program with Plan D. Plan D is a federal program to subsidize prescription drug coverage for those under Medicare. Your state chose to intervene in another way to supplement Plan D. That’s more related to different levels of government intervening separately than there being a single economic rationale.
By breaking that out prescription drug coverage a separate piece instead of making it part of base Medicare , with varying insurance coverage available in different plans, it allows some choice in the system. Depending on risk aversion, financial status, and possible other coverage it allows seniors to target the right insurance plan for their situation. (For about 1/3 of seniors that’s currently not enrolling in Plan D.) By breaking that coverage out separately it allowed tweaking the system to better subsidize those at the most risk, low and middle income seniors, while avoiding the costs of just providing a once size fits all (badly) answer to everyone.
Medicare Part D(isaster) was founded to address the issue of senior citizens being unable to afford their meds. We all know how well that’s worked. :smack: :mad:
When it was announced in the early 00s, I was still at the grocery store, and there was a lot of publicity about how pharmacists were almost universally opposed to it. One of my colleagues, who is probably eligible for it by now , summed it up best: “When that goes online, you will find out just how free it is.” And he was right.
My question is about the basic economics of the scheme.
Insurance is generally used to share risk among persons/companies participating in similar activities. Risk is statistical so there can be some basis for computing cost of underwriting coverage. Companies add value by determining the reasonable cost of coverage and by banking the system.
Under Part D, insurance companies issue cards for groups of drugs. Purchasers do not know what drugs they will require. So they are making a blind purchase. They do not know the value of the drugs, even at check out. All they know is that they sometimes have to make an additional ‘co-pay’.
So, what is the value added by the insurance companies? There are no statistics involved so how are the prices determined? Why are there multiple companies - the prices are unknown so there is no competition.
Then there is the donut hole. What is the rationale there?
No, the insurance company will send you a formulary, or schedule of the drugs they cover. Co-pays are usually more for brand-name drugs than for generics, but you will see the coverage for any drugs you are prescribed. You will also know your out-of-pocket costs so that you can anticipate when you will hit the coverage gap. There are no surprises about the costs of your drugs. If you read your formulary, you will know the costs of your drugs when you check out.
Also, if you are low-income, you can apply for extra help with your Part D expenses from the Social Security Administration… This is above and beyond the coverage offered by your insurance company. The only requirements are that you have Medicare, meet a certain income level, and reside in the U.S. If you qualify, brand name drugs cost no more than $8.35, generics cost $3.30, and there’s no donut hole. After you spend a certain amount, there is no charge for your medications for the rest of the year. I have Extra Help, and it’s worth looking into, as the savings are fantastic. There is no cost for the extra coverage from Social Security.
Thanks for the information. Perhaps I misstated the lack of information. I was referring more to the fact that you do not know your requirements when you initially compare the offerings of different insurance companies, unless you already have a chronic disease. In that case there is no statistical risk involved so why is it covered by an insurance company?
The question is still: what is the economic basis for the scheme? What is the basis for the card issuers getting reduced prices? They do not buy in volume and stock the product? They do not increase the size of the market? They do nothing but collect money for issuing cards.
At the time Part D was being debated, they wanted to cover catastrophically expensive chronic meds for middle and upper-middle class retirees. And also subsidize the very cheap basic meds for poor folks.
As well, they needed to avoid the politically disastrous label of “welfare”; the program, like Social Security and the rest of Medicare, needs to be seen as “Everybody pays in, everybody gets out. Don’t pay, don’t get.” Only that gives enough political cover for what’s still a redistributive system.
Trying to cover the very cheap stuff for everybody was estimated to be too expensive; the total cost of the program would be ginormous. So they injected a layer in the middle where the subsidy is withdrawn. Simply to make the total outlay a number Congress could stand to sign up to. While retaining the polite fiction that the program is universal, not targeted.
Speaking to the rest of your questions …
With all things related to medical insurance, the rest of the logic can’t be fully understood by simple comparison to homeowner fire insurance or car collision insurance. Substantially everybody uses medical care; substantially nobody has their house burn down. So if you’re trying to use car or house insurance as a metaphor to understanding commercial or governmental medical “insurance”, you’re lost before you begin.
Also, one thing you need to understand and seems to be leading to a lot of your confusion, those drug discount cards have nothing to do with Medicare. I’m not on Medicare and I’ve used those discount cards occasionally.
The purpose of those discount cards varies. Sometimes they are just like coupons for anything else you might buy. In some cases they are provided by pharmaceutical companies to make their drugs more affordable to certain groups of people.
Are any of the “state” cards actually issued by or affiliated with state government? The ones I’m familiar with (e.g., Florida, New York) are privately run programs; New York’s, e.g., started in the Greater New York Chamber of Commerce. The real target is people who would not otherwise fill the prescription in the first place, the people who couldn’t afford it if not for the discount. The pharmacies are in it to get people in the door: if you visit a given pharmacy to buy the pills, they can also sell you groceries or toothpaste or band-aids, etc.
As far as OP’s comments about “you do not know your requirements when you initially compare the offerings of different insurance companies,” this is false, because most customers have a pretty good idea. The bulk of prescriptions are for chronic conditions: the top ten most prescribed medications for Medicare, e.g., are:
Only one of those ten (the pain pills) has any kind of significant rate of sudden onset, and even that one can be used for chronic pain. All of the others are medications most people expect to be be taking for years and years.
My wife has serious chronic conditions, I do not. So, when we signed up for part D she shopped for a company that covered the medicines she knew about at the time. Subsequently some of her medicines are covered by the company she chose and some are not. In my case it’s always a surprise. I take a prescription to Walmart and I’m told whether they pay or not. Kinda like watching the wheels on a slot machine and ->kaching<- you win or loose.
Last week I went to pick up 4 prescriptions for my wife. I drove 60 miles to a pharmacy that has lower prices for these particular medicines. At the store there was confusion about the pricing. The co-pay was $295 or $188 or $78 depending on which plan/card/part/incantation was used for each of the 4 drugs. But there are rules about how the cards/plans/parts/whatever can be used in combination. The technician said the $78 co-pay did not fit the rules so she asked the pharmacist who agonized over it for a bit and finally said “give him the 78 bucks”.
Arrrrgh!! All of the pills come out of the same bottle!
There are no market forces at work here. There are no issues of quantity or service or quality determining price. So, is it strictly political as some above have described? Is there no tangible basis for the pricing? What are the insurance companies negotiating to establish the prices?
Hey, maybe we should have a system like this for cars. I go to Land Rover and show the guy a card from some insurance company and he says “just a minute, it could be $78,000 or $40,000 or $25,000, I’ll have to ask the boss”.
, summed it up best: “When that goes online, you will find out just how free it is.” And he was right.