In the short run, what happens to the drug benefit depends critically on enrollment, enrollment, and enrollment. Yet voluntary enrollment in the benefit has been sluggish so far at best.
If beneficiaries enroll steadily despite their confusion, irritation, and the deserved bad publicity for the benefit as it has gone “live,” the market-based design will have a chance to work temporarily—probably until the federal government stops assuming much of the insurers’ risk. Insurers flocked to the benefit in large part because there was some chance that they could make money without much chance of loss. If enrollment is robust, drug companies will compete to offer lower prices, premiums will remain relatively low, plans will stay in the market, and beneficiary dissatisfaction with the program will subside. If enrollment continues to flag, premiums will rise, plans will pull up stakes, and the future of the benefit will be in more immediate jeopardy.
As it stands, due to the complicated design and the ham-handed implementation of the benefit, the rollout seems almost calculated to reap successive waves of bad publicity. First we saw the mystifying two-stage sign-up process for dual eligibles, followed by the announcement of participating drug plans without adequate supporting information, and then the bungled transfer of beneficiaries from Medicaid to Medicare. Another round of negative publicity may predictably ensue in May, when beneficiaries who haven’t yet signed up face late enrollment penalties.
The drug benefit’s implementation has been so feckless that one might think—even making reasonable allowance for bureaucratic snafus—that the success of freestanding drug plans is not the administration’s intent. Instead, it may be pursuing a more longstanding goal—increasing enrollment in private Medicare managed care plans. Compared to negotiating the labyrinth of premiums and cost-sharing arrangements in the standalone prescription drug plans (PDPs), joining a Medicare HMO is a snap.
This migration toward comprehensive private plans might already be in the works. As an article in yesterday’s Wall Street Journal points out, Humana plans to use the lure of low premiums for its PDPs as a loss leader for its more profitable Medicare Advantage (MA) plans. To be sure, this may only be one insurer’s gamble, but the enrollment numbers for MA plans bear watching.
One other enrollment number, sadly, stands out: the relatively low number of low-income Medicare beneficiaries who have successfully applied for subsidies. Just 1.1 million of the 4.6 million HHS projected last year would receive this subsidy in 2006 have been approved thus far. Since these are the beneficiaries who stand to gain the most from the drug benefit, this slow take-up rate is especially troubling.