COP-OUT

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I was all set to do a companion piece to my last post.  I was going to call it, “Medicare Part D: Between a Rock and a Hard Place.” It was going to weigh the annual cost of the “optional” Medicare Part D insurance premiums deducted every month from Social Security benefits paid to eligible seniors in the United States against the very real risk of finding oneself in need of having to pay out of pocket at some time in one’s future for prescription pharmaceuticals that could bankrupt you in order to keep you alive.

(Like, just by way of example, $84,000 for the latest, and most effective, treatment for Hepatitis C.  What’s Hep C to you?  Well, I don’t know. But it’s estimated that four million Americans are walking around with those little Hep C suckers swimming in their blood streams and slowly destroying their livers. Many of the four million don’t even know they’re infected, because it happened before the virus became identifiable and could be screened out of blood banks.)

Then I discovered I had already written this companion piece — two years ago! (It was minus the reference to Hep C medication, which came along later. But still….)  The post was called Why Am I Paying $101 a Month for Medicare Part D?  You may even remember it if you’ve been hanging around “The Getting Old Blog” that long. And if you don’t, because you haven’t, you can certainly click the link to read it now.  The piece hasn’t aged a bit, except for the stated price of the Part D premium, which (of course) was somewhat lower two years ago. So rather than repeat myself, as old folks are wont to do, I had better change the subject.

The first thing that comes to mind as a quicky replacement post is a cartoon recently placed on our refrigerator door by Bill, who has taken to musing aloud that our life together would be even more perfect if we had a third cat.  Not so coincidentally, the cartoon is another example of someone beginning to repeat himself  (like me).  But it’s somewhat more amusing than anything I wrote, or could write again, about Medicare Part D. So here it is, even though it may very well fall flat with dog lovers.  I’ll try harder next time.

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NEW YEAR’S GREETINGS FROM THE SOCIAL SECURITY ADMINISTRATION

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If you’re too young for Social Security benefits, you may not be aware that every December the Social Security Administration (SSA) sends out a notice to benefit recipients of their “benefit amount” for the coming year. It doesn’t want us elderly Americans to be surprised when the first monthly deposit of the new “benefit amount” arrives electronically in checking accounts come January 3.

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Sometimes the amount actually goes up a tiny bit. That’s because benefits for “senior citizens” are supposed to rise with the cost of living. However, when there’s no such rise, as measured in ways described below, the benefit does not go up.  Or, as the SSA described it reassuringly to me and millions of other elderly citizens last month:

We review Social Security benefits each year to make sure they keep up with the cost of living. The law does not permit an increase in benefits when there is no increase in the cost of living. So your benefit will stay the same in 2016. [Italics added.] There was no increase in the cost of living during the past year based on the Consumer Prince Index (CPI) published by the Department of Labor. The CPI is the Federal government’s official measure used to calculate cost of living increases.

The Consumer Price Index used by the SSA for its periodic Cost of Living Adjustment is the CPI-W. According to Wikipedia, the CPI-W is based on the price of an alleged market basket of products used by an urban wage earner and clerical worker population consisting of clerical workers, sales workers, craft workers, operations and service workers, and laborers.  Excluded from this population are professional, managerial and technical workers, the self-employed, short-term workers, the unemployed and retirees and others not in the labor force. Since retirees are excluded, it follows that their increased medical and drug expenses are not factored into the CPI-W.  The CPI-W apparently did not go up in 2015.

Bill and I have just spent the past few weeks investigating several well-recommended non-profit retirement communities in our area, where I specifically asked about the estimated increase in monthly fees from year to year — the fees representing a sort of unofficial consumer price index for the elderly who might be considering a move to one of these places. These are the fees which cover the price of one hot meal a day, heat, electricity, basic television, cleaning, plant and grounds maintenance, and the like.  At Pennswood, a Quaker retirement community in Newtown, Pennsylvania, I was told it is just under 3% every year, including 2015.  At Stonebridge, in Montgomery, New Jersey, it was reported as between 2.6% and 2.7%.  At Windrows, in Plainsboro, New Jersey, it was similar.  Does it make sense for the SSA, whose beneficiaries are the old and the disabled, to base its Consumer Price Index calculations on putative expenditures by a wholly different population?

Let’s leave that one unanswered for the time being and move on to the SSA’s December message.  The truth is that the SSA was jerking us around when it announced that because the cost of living did not go up in 2015 (yeah, yeah), our benefits would “stay the same” in 2016.  Yes, gross benefits will remain the same. But as a practical matter, the message is a lie. The gross benefit is reduced by the monthly premium for Medicare Part B (insurance for out-of-hospital medical costs such as doctor visits, outpatient “procedures,” and the like), so that the money which reaches your bank is net of that premium. If you signed up for Medicare Part D, which covers most of the cost of prescription medication, that monthly premium also comes out of the gross.  And guess what? The monthly cost of the two premiums together went up between 2015 and 2016. Which lowered the net benefit — the actual amount of money old people get to spend on the “cost of living.”

It didn’t lower it very much — only by $15.60 a month.  But the average Social Security monthly benefit is $1.230.00 gross. (Again, I credit Wikipedia for this information.) Take away $209.60 — the 2016 monthly premiums for Part B and Part D together — and only $1.020.40 is left. If I were in that parlous situation, I would rather not pay the additional $15.60 in premiums and have $1,036.00 in income every month, like last year.  $15.60 represents at least a couple of thrifty home-cooked dinners.

When Franklin Delano Roosevelt signed the original Social Security Act into law in 1935, the benefits were intended to be only one leg in a three-legged stool, supported on its other two sides by a private pension and by retirement savings. But according to Eduardo Porter, in “An Aging Society Changes the Story on Poverty for Retirees” (New York Times, December, 22, 2015), a recent study by the Government Accountability Office estimated that fewer than one in five retirees among the bottom 20% had any kind of defined benefit pension that pays a guaranteed monthly amount, and fewer than 1 in 10 have any retirement savings at all. Moreover, a typical low-wage retiree can expect to receive only 44% of his or her lifetime wage from Social Security.

That being the case, one could, of course, advise our “average” beneficiary to forgo prescription medication insurance in 2016. But is that really a “luxury” for the old? Are the still relatively healthy young aware of how much it’s going to cost to ride bareback — that is, uninsured — into the wilds of pharmaceutical costs awaiting them when they age, even if they’re among the relatively few who’ve always taken care to eat right, exercise, avoid stress, and be born to genetically lucky parents? Why not advise the pharmaceutical and insurance industries to forgo just a little profit instead?

 

 

 

 

 

WHY AM I PAYING $101 A MONTH FOR MEDICARE PART D?

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Every December, the Social Security Administration sends Americans receiving a monthly Social Security benefit a statement of the “New Benefit Amount” for the following year.  Sometimes the amount doesn’t change from year to year, but occasionally it does. My statement arrived two weeks ago, informing me that on January 3, 2014 my benefit will increase by 1.5 percent because of a rise in the cost of living.

However, there are deductions from the gross monthly benefit amount, which are itemized on the statement.  No deduction for Medicare Part A, of course.  That’s the part of Medicare which pays for visits to doctors for approved medical services. [Note:  I stand corrected here by a perceptive reader.  See the comment section below.  Part A covers hospitalization, not doctor visits.]  It’s also the part of health insurance for elderly Americans entitled to collect Social Security which is truly single-payer.  (And the only health insurance in America which is.) You pay in as long as you work; the government pays out after you turn 65, for as long as you live.

[This is not a primer on Medicare, so I am limiting my observations to original Medicare, which is still in place for anyone who wants it.  There are some byways available, routing coverage through Medicare-affiliated plans managed by for-profit insurance companies.  I can’t speak to those, and won’t, except to voice my suspicion that they’re probably not the way to go.  Shareholders in those insurance companies will disagree with me.  But you can see where I’m headed here, so I’d better stop.]

The first deduction from the gross monthly Social Security benefit  is the premium for Medicare Part B.  This is optional. But anyone getting older would be a fool not to opt for it because Part B is the part of Medicare that covers you for visits to doctors for approved medical services.  You don’t have Part B?  You pay for every visit out of pocket, or you don’t go.

The Part B premium money stays with the government, which also administers that part of Medicare  — just like in those European countries that opponents of single-payer health coverage in our Congress call “socialist.”  Neither Medicare Part A (which is entirely single-payer) nor Medicare Part B (to which you contribute monthly premium once you’ve stopped working) asks you to pay anything else, after a tiny co-pay per year.

But what about medication?  AdminIstered in hospital, it’s usually covered by Part A.  Taken at home, it wasn’t covered at all until Medicare Part D came along.  [Just so you know, Part D was hailed at the time of its enactment as one of the (few) achievements of George W. Bush’s administration. Interestingly, no pharmaceutical or insurance companies objected to its passage.  Hmmm.]

Prescription drugs were — and remain — extraordinarily expensive in the United States.  Pre-Part D, if you were really sick, and not really rich, they sucked up all available income and then some.  Medicate or eat.  Not a great choice.

Part D could therefore be seen as truly remarkable progress in a truly pig-headed country. (Which happens to be my country, so the First Amendment to the Constitution permits me to call it that.  If I were French or English, which I occasionally think might be nice to try, I would have to mind my own business on this subject or get punched in the nose by some redneck.)

However, when you get to be 65, you may rethink your views about the “remarkable progress” encomium.  Of course you always understood that there would be a premium for this relatively new drug coverage.  But it, too, could be deducted from your monthly Social Security benefit, so you didn’t have to actually pay out of pocket.

Or it could be not deducted, as you chose; you might prefer to be billed directly. Or you might prefer not to participate at all.  (American freedom at work!)  If you’ve always been perfectly healthy, and pay out of pocket for no more than one or two rounds of doctor-prescribed antibiotics a year, non-participation might seem a good idea.  Why pay a monthly premium for what you don’t yet need?

“Yet” is the operative word.  Five or ten years down the road, when you’re older and suddenly sicker, you can’t just sign on for your Part D coverage.  You will have to pay a penalty every month, on top of the monthly premium, for the rest of your life, based on a percentage of the average national premium each month you didn’t pay since you were eligible for the coverage. (I didn’t make this up.  It’s what it says in the handbook helpfully titled, “Medicare and YOU: 2014.“)  Bummer, no?  Understandably, very few of us, if any, elect not to join up as soon as we can.

Okay, so what kind of Part D deduction are we talking about here?  [And this is what has got me so steamed up.]

Well, the first three things you need to understand is that (1) the premium may come out of your government Social Security benefit but it gets sent to a for-profit insurance company of your choice that’s licensed to administer Part D in your state;  (2) each insurance company sets its own premium;  and (3) the premium has gone up up every year since the inception of Part D (presumably because there’s no law against raising it) — even when your Social Security benefit doesn’t!

There’s more: each insurance company gets to decide what drugs it will include in its “formulary” ( a list of the drugs it “covers”).  Yours isn’t covered?  Tough.  Your doctor will have to try to treat you with something that is covered.  (Insurer as medical supervisor, so to speak.)  Your insurer of choice also gets to decide what it will charge you for the medication it has contracted to help you pay for. That’s right:  there’s not only an annual deductible — unless you pay a significantly higher monthly premium — but a co-pay for each approved prescription filled, calculated as a percentage of the whole:  smaller for generics, larger for brands. (And you thought your medicine was going to be free once you paid the premium?  Hah!  Think again.)  Of course the prices of the drugs go up each year (right in step with the monthly premium), which also drives up the dollar amount of the co-pay. [Medicare and YOU: 2014 tells me the insurer I chose for my coverage will be charging me up to $76 for a thirty-day supply of a non-generic medication this year. Nice to be warned.]

And then there’s the “doughnut hole” — that sweet spot between the point where you and the insurer combined have spent $2,850 for covered drugs and the point where the amount of such expenditure reaches $4,550.  Once you’re in the “hole”  — described legislatively, and less pejoratively, as “the coverage gap” — you’re on your own.  You pay for everything all by yourself, even though you’re still paying the monthly premium! 

Knowing all that, you can imagine my surprise on learning that in 2014, $101 in Part D premium will be deducted from my infinitesimally increased Social Security benefit every month. (Not quite wiping out the increase, but almost.)  That premium comes to $1,212 annually, whether I ever have a prescription filled in 2014 or not.

I’m not a hothead.  But when I think about it, I must conclude that I will be diverting $1,212 of my Social Security benefits to my insurance company in 2014 to compensate it for paying about two thirds of the first $2,850 in costs of covered medication that I may need over the course of the year. (So far I haven’t come close in any year since Part D began.)  In addition, the size of the premium compensates the insurer for underwriting the risk that an over-65 person like myself might run up more than $4,550 in costs of covered medication before the end of the year, at which time the insurer would have to begin coughing up all but 5% of those costs until December 31.  After that, we all go back to square one  — with increased premium, new formulary, new drug pricing, new co-pay beginning in January 2015.

For me, as I have parenthetically stated above, this is still somewhat theoretical:  I have not yet come close to reaching the doughnut hole in any year since Part D was enacted.  So think of this post as an expression of premium sticker shock.  Nina flying off the deep end.

Because yes, even in my dotage I continue to be outraged that I live in a country where the bottom line drives everything, including federal legislation supposedly designed to “help” the elderly sick but principally engineered to grow profits for large pharmaceutical and insurance corporations.

Okay, I’ve got that out of my system now. Instead of ranting and raving, what I should be doing is counting my blessings that I’m not yet — how that “yet” keeps creeping in! — really sick and making every effort to stay un-sick for as long as possible. So I’m going to tuck away my heads-up statement from the Social Security Administration in a large folder marked “2014” and try to forget the whole thing until 2015. (At which time you may hear from me again.)

You have to pick your battles.

Thanks for reading.