By Mark Miller
CHICAGO Oct 16Seniors are wasting hundreds of
dollars annually on Medicare Part D prescription drug insurance
coverage they don't need.
That's the key finding of a new study by health policy
researchers at the University of Pittsburgh, who studied actual
Part D enrollee data for 2009. The researchers compared total
spending by Part D enrollees - defined as premiums plus
out-of-pocket spending - with the least expensive insurance
option that would have met their needs.
Just 5 percent had picked the most cost-effective plan; more
than 30 percent over-spent by $300 to $500 and nearly 20 percent
over-spent by $500 to $1,000. Looked at another way, the
researchers found that 22 percent of beneficiaries could save at
least $500 a year by switching to the cheapest plan available.
Those amounts are significant, considering that most seniors
live on fixed incomes. Half of all Medicare recipients this year
have income of $22,500 or less, according to the Kaiser Family
Foundation, and incomes are roughly half that amount among
African Americans, Latinos and single seniors.
WHY THE DISPARITY?
Part D offers seniors the opportunity to shop in a private
marketplace of insurance plans. In most parts of the country,
enrollees can choose among dozens of plan options. They can shop
for a plan that best fits their needs during the annual
enrollment season, which is underway now and continues through
The University of Pittsburgh study results undercut a key
argument in favor of further Medicare privatization - namely,
that consumer choice and competition produce the best
efficiencies in healthcare.
Paul Ryan is a prominent political champion of that
argument, which he reiterated in last week's vice presidential
debate: "Choice and competition - we would rather have 50
million future seniors determine how their Medicare is delivered
to them instead of 15 bureaucrats deciding what - if, where,
when they get it."
But the University of Pittsburgh researchers found that most
seniors don't make optimal consumer decisions. They measured the
difference in total spending (premiums plus out-of-pocket
spending) that occurred in seniors' actual plan choice and the
cheapest plan available based on their medication needs.
They found that enrollees don't buy the most cost-efficient
coverage. In some cases they don't shop around enough, and other
times they are risk averse and decide to over-protect themselves
with more expensive coverage than they actually need.
Plan deductibles were a major pitfall, the study found.
Three-quarters of the Medicare population studied opted for
zero-deductible plans, but they would have fared better in plans
with deductibles. So they over-spent by $257 on average.
The researchers also found that enrollees were
over-protecting themselves against the possibility of spending
so much that they crossed the threshold into the doughnut hole -
the nearly $4,000 gap in which seniors have to pay 100 percent
of the costs between where regular coverage ends and
catastrophic coverage picks up the tab.
Seniors can buy policies with gap coverage, but the premiums
are much higher - averaging $95.74 this year, compared with
$36.15 for plans without gap coverage, according to Avalere
Health, a healthcare consulting company. Some policies also
cover generic drug costs in the gap (a feature not available on
standard policies), but the researchers found that seniors with
generic gap coverage overspent by a median $683 per year.
"We'd agree that people are paying more than they need to in
many cases," said Mary Dale Walters, senior vice president of
Allsup Medicare Advisor, a fee-based service that assists
seniors with Medicare plan shopping. "Only 3.6 million people
will actually hit the doughnut hole, so too many people are
worrying about having coverage there."
The researchers also found that seniors with chronic
conditions such as diabetes or heart failure were no more likely
to over-insure. While they did find that shopping acumen
declined with age, beneficiaries experiencing cognitive decline
actually were more likely to purchase cheaper plans.
"Patients who over-spend either didn't look around much for
the cheapest plan, or they were risk averse and wanted more
expensive coverage to protect themselves," said Yuting Zhang,
associate professor of health economics at the University of
Pittsburgh Graduate School of Public Health, a co-author of the
The most common shopping mistake is to consider only your
current premium and whether it is acceptable for the coming
year, Walters said. "Many seniors aren't looking further." Key
factors to consider, she said, include any limits on drug
quantity, or changes in the cost of regular medications.
Zhang advised seniors to use the Medicare Plan Finder online
tool () to find the most
cost-efficient plans. The plan finder allows seniors to enter
their medications and dosages, and view a ranking of plans by
cost. She also advised staying away from doughnut hole coverage
unless your previous year's medication history indicates you'll
need that protection.
What Zhang would really like to see is a helping hand from
the Centers for Medicare & Medicaid Services (CMS), which
administers Medicare. "CMS could send a letter every year
recommending the best three plans for you, based on your drug
usage last year. They could even assign you to a plan based on
your medication history - it wouldn't be that difficult to do."