Clouds on the Horizon, Part 1

J0316859 Almost everyone has heard about Medicare Part D.  It is the prescription drug benefit that is now available for seniors.  Everyone who has heard about it has also heard about the troubles associated with the act of signing up – the complications and the hesitations.

But recently, there has been some hubbub about the numbers of people enrolling in Medicare Part D.  The trend seems to show that more people are signing up, though there is some controversy on that point.  However, as the numbers add up, so do some issues respecting the benefit.

But one thing is clear.  The success or failure of the Medicare Part D benefit for seniors will ultimately tie not only to how good of a job people think government is doing in providing the benefit, it will reflect on the pharmaceutical industry itself.  The two are intrinsically linked.  How, then, will public opinion be shaped by it?

This is the rub.  One of the important features of the benefit is that it is somewhat erratic.  Initially, an enrollee gets their drugs covered, with the enrollee paying a sum each month for the coverage and with the enrollee also paying a large co-pay for each prescription.

J0386431 However, once the enrollee visits a certain ceiling, just over two thousand dollars, there is a bit of a shock.  The enrollee is one his or her own.  Coverage stops.  This is popularly known as the "donut hole" which, I think, many will not be celebrating by sitting down to a cup of coffee and dunking a nice chocolate donut.  The coverage only resumes when they have hit yet another ceiling, after spending over $1200 of their own money.  Then catastrophic coverage kicks in, and they are mostly covered again.  That gap could mean trouble. 

The fact that the enrollee is on their own is largely unrealized by people who have just enrolled.  They haven’t reached the donut hole.  But once they do, and start doing so in large numbers, there could be problems.  Imagine an enrollee on a number of prescription drugs, covering everything from diabetes to high blood pressure to depression.  They could conceivably hit that just over $2000 threshold in pretty short order.  Imagine further then, the shock when the high co-pay they were paying suddenly transforms to only-pay. 

That is when the shock will settle in.  People who are of the age of Medicare beneficiaries don’t like shock.  I’m willing to wager that a fair number of that population who has signed up are not aware they are heading for a trip to the donut hole. 

That feeling that they will be experiencing will not only be directed at the architects of this plan, it will also be cause for focusing once again on the plight of a senior citizen having to choose between their necessary drugs and other expenses, such as eating.  During the donut hole, they may cut their meds to save money, they may do without, or they may go into debt.  All of which were end results that the benefit was supposed to do away with.

The first media story about Medicare Part D implementation was about the troubles in enrollment.  My guess is that the second big story is going to be when people start disappearing in the donut hole.  It is time to prepare for the donut hole milestone and for companies to prepare their communications that articulate their support for those who have fallen in it. 

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