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Part D – the real problem

No, it is not going well. Despite what the spokespeople at HHS claim, enrollment in Medicare Part D has been a failure to date. Perhaps not a dismal failure, but certainly a lot further towards the “failure” end of the spectrum than the “exceeding our expectations” end. Here’s why, with thanks to Bob Laszewski for boiling down a complex topic to an understandable conclusion.
Enrollment goals
Only 21.3 million Medicare enrollees have the ability to make a decision on enrollment in Part D. Sure, there are a lot more Medicare eligibles, but many are covered under their employer’s plan (11 million), Medicaid (6.2 million of the so-called “dual eligibles”), and 4.5 million under MedicareAdvantage programs.
Of the 21.3 million, 17% have signed up so far. That’s right, 17%. As I have been noting for months, the stage is now set for big problems with Part D. You can read about the issues inherent in adverse selection here; briefly it is what happens when only sick people sign up for insurance.
In general insurers need at least 70% of eligibles to sign up to get a good spread of risk. If there is not a good spread of risk, it is highly likely that the only people who signed up are the ones who will gain more in benefits than they will pay in premiums. Result – insurers will lose money hand over fist on this deal (although their losses will be covered by the government, i.e. the taxpayer, for a period of about two years).
There continue to be problems with dual eligibles enrolled in the wrong plans, missing information, coverage issues, etc. But, as Bob points out, that is not the real problem (although it certainly is to those folks who can’t get their meds.) The real problem is taxpayers are going to foot the bill for a program that is a poster child for adverse selection.
What does this mean for you?
If you are a drug company, lots of profits. Eligibles, a great benefit. Taxpayers, bad news.

Joe Paduda is the principal of Health Strategy Associates



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