Medicare Part D: Learn from my mistakes

Following up on my piece on Medicare Advantage programs (Medicare Advantage: OK, it's bad for the country, but what about for me?, Dec 6, 2022), I wanted to add a piece on the Medicare Part D Prescription drug program. While others may be smart enough to not make the mistakes I have, I believe that the structure of the program and the behavior of many or most of the insurance companies involved in it encourage people to make decisions which are often not to  the person’s benefit (of course, they benefit the insurance companies!), so maybe others can learn from mine.

First, some clarifications about the last post, based upon comments I have received. Not all Medicare Advantage plans are equally bad or equally predatory. The for-profit ones run by insurance companies are the worst. Several not-for-profits are descendants of the original HMOs (from the time before they were called HMOs), which were real consumer cooperatives based upon the idea that if they could cut out the middleperson (the insurance companies) they could deliver more healthcare to members for the same money or at least the same healthcare for less money (these included HIP in NY, Group Health in Seattle, Ross-Loos in LA). Kaiser was not a consumer cooperative -- it was originally begun by Henry Kaiser for employees of his steel company -- but did function in a similar way as a nonprofit. Many of these were, however, bought out by insurance companies, venture capital (private equity) companies, and other profit-making organizations, and of course most of the Medicare Advantage plans that now exist were always for profit.

It should go without saying that when the “middleperson” (insurance companies) that you were going to cut out to benefit the consumer members takes over ownership, things change.  And, while many of the non-profits are less egregious in their exploitation than the for-profits, they share many of the same characteristics. So it is still “caveat emptor”, let the purchaser beware. Consider the idea that a non-profit Medicare Advantage plan may be better for you than a for profit, but it may still be a bad choice compared to traditional Medicare (TM). And certainly compared to what we should have – an improved and expanded Medicare for All.

Which brings me to Part D. Originally, Medicare was designed primarily to cover hospital care, then the most costly part of healthcare, and this, now called Part A, is the only portion covered by the Medicare Trust Fund from the money deducted from paychecks. Part B, the portion that covers outpatient care, is funded by general revenue plus monthly premiums paid by Medicare recipients to the government, which in 2023 will begin at about $164/month (for incomes below $97,000/year) and go up with higher incomes. Medicare Part C is what is now called Medicare Advantage, the substitute for TM (Parts A, B and D). Part D is the prescription drug plan. It became apparent in the decades since Medicare was created that prescription drugs were an increasing portion of the annual medical costs for Medicare recipients and that they were not covered was a problem for many people. So, eventually, under the presidency of George W. Bush, Part D was passed to cover them. But, of course, it was a “compromise”, which, as usual in government, means a compromise between meeting the needs of the American people and making a lot of money for the private corporations that ‘lobby’ (read: give money to) Congress. So, rather than covering drugs under the Medicare program, which would have done it pretty much at cost (traditional Medicare’s overhead is approximately 2%), it was farmed out to private insurers, some non-profit but mostly for-profit companies. Their overhead is a lot more, and they make a lot of money on this, as every Medicare recipient is required to have a part D plan (unless they are still working and covered by an employer plan or have a Part C, Medicare Advantage, plan that covers prescription drugs). Private for profit drug manufacturers also won another huge concession from Congress and the administration in the form of a prohibition on Medicare negotiating the prices of the drugs. As the largest purchaser of these drugs in the country, they would have great leverage and get great prices, and as a result the pharmaceutical companies would make less money. We wouldn’t want that, after having carved in profit for the insurance companies, so we don’t have it.

So let’s talk about me. When I retired and had to get a Part D plan I also needed a Medicare Supplement plan, to cover the 20% that TM doesn’t pay and other costs. I got the latter through my insurance company, USAA, and got a good policy for a reasonable fee. One thing Medicare does regulate are Medicare Supplement plans, which are identified by letters: A, K, F, G, N, etc. All plans offered by any insurer have to meet the standards – that is, the benefits for all type F or type K plans have to be the same-- so the competition is on price and service, which is absolutely the way it should be (but rarely is). However, USAA does not offer a Part D plan; they contract with Humana to offer their plans to their customers, so I chose a Humana plan. Unfortunately, the standardization that characterizes Medicare Supplements is NOT true for Part D; the different plans have all kinds of complicating and confusing characteristics. Both Medicare and the insurers offer “calculators” where you can put in the drugs you take and it calculates what they would cost you on each of their plans, adds the premium, and voilà, tells you the best deal for you. Maybe. If you trust them. But there turn out to be some hidden factors.

I chose the Humana plan with the cheapest premium, Humana Wal-Mart, not because I expected to buy my drugs at Wal-Mart but because it was the cheapest. My drugs, you see (I take 3 prescription drugs) are all available generically. They are (relatively) cheap. And so Humana does not cover them. So I pay out of pocket. Until and unless I meet my deductible; then they pay, maybe. But what I discovered in the first year is that any drug I get that is a lower price that the supposed retail price doesn’t count toward my deductible. Humana’s justification is that they have negotiated lower prices, and I am benefiting. It sounds possibly plausible, except all  insurers have pretty much the same lower prices. And usually more than you’d pay with GoodRx®. But it means that I can never meet my deductible and thus they never pay anything. But I pay them a monthly premium. That is a good deal – for them. Sounds an awful lot like a protection racket!

Because I just kept the same plan in my second year, I thought I’d do the same in my third, and didn’t go online to choose a plan during open enrollment. I then got my bills and my premiums went up from about $17/mo to $57/mo! When I inquired (irate) they said I didn’t elect a plan, and the exact plan I had had (the cheapest) was no longer available, so they decided for me that I’d be best off in their most expensive plan! Two things to note: 1) while my premiums went up (and I had to keep this plan for a year), they still paid nothing, so I just contributed more to Humana, and 2) they did have a cheap plan, which cost even less than I had been paying ($14/mo) but of course they didn’t think I’d want that.

The next year, I took it, and have had it for a few years. The premium has crept up, from $14, to $17, to $22. Last year I paid $272 for drugs and they paid $21. That, I think, was for a vaccine. This year the premium is going up to $30, nearly a 50% increase. But I didn’t notice that until they sent the payment book. It took me two days to look, call Humana and discover from them that the increase was just, well, an increase, no reason other than they want more money and can do it, and that when I went to Medicare.gov there were companies offering plans for as little as $7.40/mo. I would probably get no benefit from them either, but a lot lower premium. Sadly, for me, I found this out December 8, and December 7 was the end of the open enrollment period.

I won’t forget next year. I have no loyalty to Humana, and think they are unscrupulous predatory profiteers. Of course, most all of them are, but Humana seems to be worse than many. Luckily, the premium difference won’t break me, but since I will get no benefit, there are about a thousand different charities I’d rather donate the money to than the Make Humana More Profit Fund.

US government programs should exist to help the American people. Some good reforms would include allowing Medicare to negotiate drug prices and standardizing Part D plans the way Medicare Supplements are. Real reform would be to have a single universal program covering all health care (inpatient, outpatient, drugs, mental health, vision, dental, etc.) and eliminate profit from healthcare.

Sorry it is too late for this year. Be careful during open enrollment next year. I will be.