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Drug plan’s flaws will
be clear when it begins

THE ISSUE Companies providing Medicare prescription drug plans to seniors will begin marketing their plans Oct. 1.

SURPRISING competition in providing prescription drug coverage to Hawaii seniors is expected to result in the nation's second-lowest premiums when the Medicare program starts in January. The program's flaws should become apparent soon afterward, indicating to Congress where it needs repair. Any changes should be made with dispatch.

Hawaii's average monthly premium among a dozen competing private insurers will be $27, lower than all states except California, according to Jeff Flick, regional administrator for the Centers for Medicare & Medicaid Services in San Francisco. That and an annual $250 deductible will result in Medicare paying seniors 53 cents on the dollar.

There is a catch: The subsidies will continue until the senior racks up drug bills of $2,250 for the year. The plan then stops paying benefits until the bill reaches $5,100, from which point it will pay 95 percent of the remaining costs.

The so-called "doughnut hole" was aimed at attracting modest drug patients to catastrophic health plans instead, thereby limiting the government's obligations. The law, signed by President Bush nearly two years ago, prohibits the insurers from selling "Medigap" insurance to fill the hole, although some are including plans designed to eliminate it.

Low-income seniors get an even better deal. Single seniors with incomes less than $14,355 and couples making less than $19,245 can have all fees waived, with Medicare picking up 95 percent of their prescription costs.

But there's another catch. A low-income senior is disqualified from the deal if holding personal assets of more than $11,500, or $21,500 for couples. Counted as assets are bank accounts, stocks, bonds, IRAs, mutual funds and real estate other than the senior's primary residence. Many seniors might scramble to transfer their assets to family members in order to qualify.

Or not. A survey last month by Kaiser Family Foundation found that 60 percent of seniors did not understand the new program, and fewer than a third had a "favorable" opinion about the benefits. Each Medicare beneficiary soon will receive in the mail a 150-page explanatory book that even Flick finds unreadable.

The government expects 30 million of the nation's 42 million elderly and disabled on Medicare to sign up for the prescription program. Bush and other federal officials, including Flick, are making the rounds to urge enrollment.

The law was enacted nearly two years ago after feverish lobbying by pharmaceutical companies. It forbids seniors from importing cheaper drugs from Canada and bars Medicare from negotiating lower prices with the drug industry.

The program is controversial, having passed both the House and Senate by the thinnest of margins -- Hawaii's entire congressional delegation opposed it -- and will remain so after its implementation. Congress was shown a price tag of $400 billion over the next decade, but the White House corrected the projection two months later to $534 billion, and estimates now range from $720 billion to $1.2 trillion.

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