Bush Drug Plan Works...For Bush (an excerpt)
by Paul Krugman
If [you're a Senior and] your cumulative drug expenses reach $2,250, a very strange thing will happen [under the Bush drug plan]: you'll suddenly be on your own. The Medicare benefit won't kick in again unless your costs reach $5,100. This gap in coverage has come to be known as the "doughnut hole." One way to see the bizarre effect of this hole is to notice that if you are a retiree and spend $2,000 on drugs next year, Medicare will cover 66 percent of your expenses. But if you spend $5,000 - which means that you're much more likely to need help paying those expenses - Medicare will cover only 30 percent of your bills. A study in the July/August issue of Health Affairs points out that this will place many retirees on a financial "roller coaster."
How will people respond when their out-of-pocket costs surge? The Health Affairs article argues, based on experience from H.M.O. plans with caps on drug benefits, that it's likely "some beneficiaries will cut back even essential medications while in the doughnut hole." In other words, this doughnut will make some people sick, and for some people it will be deadly. The smart thing to do, for those who could afford it, would be to buy supplemental insurance that would cover the doughnut hole. But guess what: the bill that established the drug benefit specifically prohibits you from buying insurance to cover the gap. That's why many retirees who already have prescription drug insurance are being advised not to sign up for the Medicare benefit...
Once you recognize that the drug benefit is a purely political exercise that wasn't supposed to serve its ostensible purpose, the absurdities in the program make sense. For example, the bill offers generous coverage to people with low drug costs, who have the least need for help, so lots of people will get small checks in the mail and think they're being treated well. Meanwhile, the people who are actually likely to need a lot of help paying their drug expenses were deliberately offered a very poor benefit. According to a report issued along with the final version of the bill, people are prohibited from buying supplemental insurance to cover the doughnut hole to keep beneficiaries from becoming "insensitive to costs" - that is, buying too much medicine because they don't pay the price. A more likely motive is that Congressional leaders didn't want a drug bill that really worked for middle-class retirees.
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