Local health plans buying into new medicare program.

Last month every Valley health plan announced their intention to take part in Medicare's new prescription drug benefit program. Starting next year they may be offering senior citizens substantial savings on their monthly pharmacy bills.

Health plans had until March 23 to let the government know whether they'd like to take advantage of federal discounts offered by the Medicare Modernization Act and offer their own plans in addition to those that will be maintained directly by the Centers for Medicare and Medicaid Services. WellPoint, Kaiser Permanente and Health Net all announced their intentions to do so, and will be working on ways to add new benefits to their existing health policies.

"Our overall goal is to continue to develop innovative, affordable new health products that are going to meet the diverse needs of an aging population, that is why we have filed our intensions of offering Part D products in all 50 states," said WellPoint spokesman Jim Kappel. "There's a lot of interest in what companies are going to be offering for individuals and employers."

When President Bush signed the Medicare Modernization Act at the end of 2003, senior citizens chose from a variety of discount cards designed to save them money on the drugs they purchased on a regular basis. Starting the first day of next year, the cards will be obsolete, and seniors will be able to enroll in discount plans directly.

Seniors who sign up for these individual plans will pay a monthly premium of about $37, with a deductible of $250. After they meet the deductible, the government will pay for about 75 percent of drug costs up to $2,250 and seniors will have to pay their own way until they have spent a total of $3,600 out-of-pocket, creating what's called a "donut hole" in coverage. Once plan member has spent $3,600, catastrophic coverage begins and seniors pay five percent of total drug costs for the rest of the year.

Developing plans

Those private insurers that applied to the government to participate in the discount program will be allowed to develop their own plan to sell to their customers. Over the next several months, insurers will be building their plans, deciding on co-payments and which drugs to discount.

"The private plans will offer different options with a tiered pricing structure. A higher tier will offer different options with a tiered pricing structure," said Samantha Rothenberger, a spokesperson for Washington D.C.-based non-profit organization Medicare Today. "Some of the more expensive plans might even reduce the "donut-hole" in coverage. The private plans that are priced higher than Medicare's $35 a month plan would generally offer more drug options."

The legislators who wrote the Medicare Modernization Act wanted to provide financial incentives in order to keep companies from dropping drug coverage for retired employees. Employers that pay for their retired employees' drug expenses but do not want to work with a private insurer can get up to 28 percent of their drug costs reimbursed by the federal government providing they provide benefits similar to those an employee would receive if he signed up for his own Part D Plan.

Thomas Rice, a professor of health services at UCLA's School of Public Health, said that the question of whether or not employers will want to immediately have access to drug cost discounts may eventually be a moot point.

"What we really ought to be more concerned about is maybe (discounts) won't be enough stimulus, companies may still decide to drop their entire drug coverage or their entire retiree health plan," he said.

Keeping coverage

A study released by the Kaiser Family Foundation and Hewitt Associates indicated that most businesses were not going to discontinue their retiree health benefits once the new Medicare programs kick in.

Fifty eight percent of employers that responded to the survey said they would most likely continue to offer prescription drug benefits and accept the subsidy. Of those companies, 85 percent said they planned to retain current benefit levels. Seventeen percent of responding companies said they are likely to offer private prescription drug coverage to supplement the Medicare prescription drug plan.

"With the MMA deadline only a year away, employers are signaling their intent to stay the course, at least in 2006. A large majority are planning to continue offering retiree coverage, with most of these planning to accept the 28 percent subsidy for Medicare-eligible retirees," said Frank McArdle, manager of Hewitt's Washington, D.C. research office, in the report.