By Dave Winans

Picture this for relaxation: a 70-mile drive across the North American prairie—through low valleys, along the tranquil Mouse River, and past wild grass, trees, farms, and old country churches. Every three months, NEA-Retired member Shirley Lindquist and her husband Darvin make this journey, from Kenmare, North Dakota, across the Canadian border to Carnduff, Saskatchewan.

It’s a happy tradition, ending with a stop at the couple’s favorite roadside restaurant and a visit to their Canadian daughter. But it also marks a curious ritual. When the Lindquists get to Carnduff, they first head to a local physician’s office where they hand over signed prescription slips—for drugs such as Fosamax, Methotrexate, and Sulfasalazine. After getting their prescriptions initialed by the doctor, the Lindquists go to the local pharmacy to fill the prescriptions and benefit from Canada ’s drug price controls.

The savings are worth every gallon of gas. Just one example: The Lindquists pay $135.96 Canadian ($109.01 U.S.  at a recent exchange rate) for a three-month supply of Fosamax pills, used to rebuild thinning bones. The price back home: $239.75 U.S.

Shirley, who taught grades 5–6 for 34 years, estimates that the total drug savings per Canadian trip equals one of her monthly Social Security checks. For Darvin, who lives with diabetes and rheumatoid arthritis and who retired from the private sector without a pension, the Canadian discount means nothing less than independence.

“If we paid full price for those drugs, my husband would be in a wheelchair,” Shirley says quite bluntly. She laments taking business from her hometown pharmacist, “but we do what we can to survive. We’re hoping something will come up to help us, though, because eventually we won’t be able to drive to Canada.”

For the Lindquists and some 100 other Kenmare residents who make the Canadian commute—and for the millions who can’t make the trek—there is a glimmer of hope.

The Medicare Prescription and Modernization Act of 2003 includes subsidized prescription drug coverage for Medicare recipients under a new Part D—with its own separate, monthly premium.

You, too, may be able to benefit from the Part D prescription drug benefit. But there are some big traps to avoid—traps that could have you spending a lot more than you expect, or even losing money.

Here’s our guide to the new prescription drug benefit:

Look before you leap.

The new Medicare drug plan is not mandatory. The choice to participate or not is yours. And if you, like many NEA-Retired members, have drug coverage under your current retiree health plan, you’d better watch your mailbox.

No later than November 15, employer and union retirement plans must send each participating member a “creditable coverage notice” that says their current drug coverage is worse than, the same as, or better than Medicare Part D. If your plan is the same as or better than the new Medicare plan, you may want to stay with what you have.

But keep paying attention. “Your plan may be eligible to receive a bonus payment from the federal government,” says NEA health care analyst Carol Malone. “You’ll need to watch that the plan doesn’t reduce drug benefits, and that it uses the subsidy to improve drug or other benefits.” 

Don’t wait more than six months to decide on a Medicare drug plan.

If your current drug coverage isn’t as good as Medicare’s, both your employer plan and you will have to make quick decisions.

The new federal drug plan goes into effect January 1, 2006. Barring an implementation delay, Medicare is allowing a six-month initial enrollment window for current Medicare enrollees to join a Part D plan or a managed care plan that includes prescription drug coverage. That six months will run from November 15, 2005, to May 15, 2006. If you miss the window and decide to sign up for Part D later, you may have to pay a penalty: an extra cost tacked onto your premium for the rest of your life.

Medicare-eligible people who continue to work and receive drug benefits from an employer plan will have just 63 days to enroll in Part D once they retire and are no longer covered by their employer’s plan.

Watch out for enticing mailings and phone calls from HMOs.

Like other retirees, Florida Education Association-Retired Advisory Board member Joan King reports being bombarded with mail and phone calls from private health care providers. That’s because the 2003 Medicare law offers tidy federal subsidies for private operators to enter the Medicare market through Part C, now called Medicare Advantage. As a result, seniors are hearing high-flying HMO/PPO promises of more choices, better benefits, and lower cost-sharing if they shift from the traditional Medicare program to an HMO or PPO.

Joining an HMO or PPO isn’t mandatory, but those calls and letters can be persuasive. The very thought of HMOs and PPOs plunging into Medicare makes King and other retirees jittery. “In our experience,” King notes, “HMOs change the drug coverage and the formulary, and so many HMOs die on the vine when they find it’s difficult to make a profit.”

Why do HMOs have financial problems? Dee Mahan of Families USA (FUSA), a non-profit, nonpartisan group, says it’s because HMOs and PPOs are not as cost-effective as traditional Medicare, due to their higher administrative and marketing costs.

A sobering thought: Between 1993 and 2003, 2.4 million subscribers to Medicare Advantage’s predecessor program, Medicare+Choice, lost their coverage and had to return to traditional Medicare—as their health plans scaled back or ended participation in the federal program. According to HHS, the number of insurers offering Medicare+Choice plans decreased by 48.3 percent during this period.

Beware the doughnut hole.

You may not be able to avoid it, but at least you can know how much of a bite it’s going to take out of your income.

The doughnut hole was inserted into Medicare Part D to save the government money by getting you to pay more of your drug costs.

Here’s how it works:

You sign up for Medicare Part D, and start paying your premiums, $35 a month on average in 2006. And you start buying the prescription drugs you need.

For the first $250, you pay every penny, in addition to your monthly premium, because there’s a $250 deductible for Part D.

But say your bills are much higher than $250. After you’ve spent the deductible, Medicare will start picking up three quarters of your drug costs. You still pay one quarter. You have to spend roughly $800 on drugs for the year before you reach the break-even point, where Part D has paid you more than it cost you in premiums.

(You might say, “I don’t spend that much.” But the problem is, you can’t know how much you’ll spend on drugs next year. That’s why we all need insurance.)

But now we’re venturing into the land of the traitorous doughnut hold, and when your drug costs reach $2,850, you fall right in! You keep paying premiums, but Medicare pays zero—not one cent—you’ve piled up another $2,850 in drug bills.

At that point, if you haven’t starved to death in order to pay your giant drug bills, you finally clamber up the other edge of the hole and the Medicare benefit reappears. And on far side of the hole, Medicare is much more generous, paying 95 percent of whatever remaining drug costs you have for the year.

The bottom line: If you spend more than about $800 for drugs (and at U.S. drug prices, many people do), you’ll get at least some benefit from Part D, and even if you don’t, you’ll get some peace of mind.

The calculation gets even more complicated if you were planning to buy your drugs from Canada, because you have to give up that savings in order to qualify for Part D. For you, the break-even point at which you actually start seeing some net benefit may be much higher than $800.

That’s another reason why we need a Congress that’s willing to buck the drug companies and stand up for retirees.

Prescriptions for a Healthier Medicine

Medicare, the federal health insurance program that covers 42 million people—both seniors and under-65s with permanent disabilities—is 40 years old this year. If you want Medicare to survive another 40 and to bring down those zooming drug prices, here’s a prescription or two:

• Stand up for the traditional Medicare program. It’s easy to be distracted by the threat of Social Security privatization while profit-driven HMOs and drug companies quietly carve up Medicare. If traditional Medicare, with its wide choice of doctors, works well for you, hang on to that red, white, and blue card—and tell your members of Congress why they should preserve and improve the program.

“When an HMO or PPO competes with Medicare, it skims off the healthy people and Medicare is left with the sicker folks,” points out NEA lobbyist Al Campos. That translates into higher premiums and cost-sharing.

• Donate to NEA’s Fund for Children and Public Education. It’s a good way to send advocates of affordable health care—and public education—to the next Congress in 2006. NEA supports legislation to close the “doughnut hole,” to allow importation of FDA-approved medicines, and—perhaps the most obvious reform—to authorize the Secretary of Health and Human Services to negotiate prices with drug companies. But those proposals will go nowhere if NEA members don’t help elect candidates committed to holding down drug costs.
• Do your homework. Stay abreast of this critical problem. For information on the new Medicare prescription drug plan, check with your local Social Security office, call 1-800-MEDICARE, or visit www.familiesusa.org and go to “The Medicare Road Show Kit.” For more Medicare facts, go to the Kaiser Family Foundation site at www.kff.org. For data on drug prices, effectiveness, and safety, visit Consumers Union’s useful site at www.CRBestBuyDrugs.org. And for more on your Medicare rights, go to www.medicarerights.org.

—D.W.

Two big questions about Medicare Plan D:

Will this law bring down drug prices?

Not likely, because the law explicitly forbids the agency that runs Medicare from negotiating better prices. That’s like fighting for seniors with both hands tied behind your back. The Department of Veteran Affairs (VA) is under no such restrictions, and it gets discounts of up to 30 or 40 percent below wholesale prices for VA hospitals, the Defense Department, and the Coast Guard, according to Dee Mahan of Families USA. Medicare, with the clout of 42 million subscribers, could do even better—which is probably why the drug companies lobbied so hard to put that clause in the law that forbids bargaining. With price bargaining, Medicare could afford to provide much better coverage for seniors at no extra cost to the federal treasury.

What’s behind the drive toward privatized senior health care?

No investigative reporting needed here. In election year 2004, President Bush declared that “the best health care system is that health care system generated in the private markets,” and the Republican Party platform reiterated the Administration’s desire to “make sure there are incentives for the private sector to develop new and inexpensive drugs.” Minnesotan Larry Koenck begs to differ with this approach. “Until we get costs under control,” he maintains, “drug companies and HMOs will dictate prices and we’ll never get them under control. Private enterprise doesn’t always work; we can’t seem to learn from other nations, like Canada.”

Or a U.S. government agency like the Department of Veterans Affairs. Is it too late for the Lindquists, Joan King, and Larry Koenck to enlist in their nation’s service?

For more information on Part D, go to www.cms.hhs.gov.