IT’S BEEN ABOUT THREE WEEKS since the sign-up phase of the new Medicare prescription drug benefit ended on May 15, and the program’s supporters have earned some bragging rights. Even with its early success and growing popularity, some key elements of Medicare reform have received little attention, and these less understood dimensions may have a larger-than-expected positive impact on American healthcare in the years ahead.
While enrollment numbers are not yet final, seniors signed up in droves–38 million and counting, according to the Bush administration. That far exceeded the goal of 30 million originally projected by the Department of Health and Human Services. That represents 90 percent of eligible seniors–a phenomenal enrollment rate for the first year of a voluntary government program. Moreover, a U.S. Chamber of Commerce survey of those participating in the early stages of the program reports that 84 percent of seniors enrolled say they are satisfied with their coverage.
Despite some conservative grousing about the program’s costs and liberal complaints that it’s not generous enough, most voters think it was right to update the Medicare program and add prescription drug coverage. In an April national survey of 800 registered voters, conducted by Dutko Worldwide, 76 percent say it was right to “update Medicare by adding prescription drug coverage,” while only 21 percent believe it was “wrong to add a costly new benefit.” These numbers vary little across either party, gender, or age groups.
Firsthand experience with the program also makes a difference. Dutko Worldwide has been tracking voter opinion about the Medicare program on a monthly basis for over two years. Prior to the beginning of the sign up period, voters’ attitudes were based on media reports rather than personal experiences. But now that a larger number of seniors have signed up, we can gauge the impact of enrollment on attitudes about the program. And among seniors who have enrolled, a 60 percent to 21 percent margin says the new drug benefit will be good for seniors, compared to a 50 percent to 31 percent margin among seniors who have not enrolled.
Remember the stories about “too much confusion” and seniors facing “too many choices?” It turns out that once seniors enroll they feel much less confused and more comfortable with their choices. A survey conducted by America’s Health Insurance Plans finds 84 percent of self-enrolled seniors had no trouble signing up for a plan; 85 percent have had no problems with the new benefit. And 66 percent say the benefits are worth the time and effort spent evaluating the available options.
Beyond these initial successes, there is another structural aspect of the program that deserves more attention and plaudits from conservatives. Unlike Medicare proposals advocated by liberals, this plan emphasizes a major role for the private sector and includes market-oriented principles like choice and competition. And guess what? It’s working.
For example, the legislation that created the program–the Medicare Modernization Act–includes a baseline requirement known as “the standard option,” more or less the bare minimum of what a program should look like and a good proxy of a government-run, one-size-fits-all model. The standard option includes a $250 annual deductible and allows a coverage gap after a certain amount of benefits are paid (the so-called “donut hole”) until catastrophic coverage kicks in. Yet as Centers for Medicare and Medicaid Services Administrator Mark B. McClellan told Congress recently, 85 percent of drug-plan sponsors, who are competing for Medicare enrollees, “chose to not include a deductible in their plan design, and in fact, most beneficiaries are selecting plans without a deductible.” Moreover, many are choosing plans that include some type of assistance through the coverage gap. This should strike fear in the hearts of liberals and Democrats who devise one-size-fits-all programs resistant to transformation.
Market forces are also driving down the cost of the program. McClellan noted in the same testimony that beneficiary premiums are expected to average $25 a month–down from the $37 projected last summer. And, “the overall cost to taxpayers for 2006 has dropped about 20 percent since the July 2005 estimate.” Projected costs over a 10-year period have plummeted by about $130 billion. When was the last time you heard the government “overestimated” costs of a program?
All of this suggests that what was once thought to be a big Republican liability for 2006–the Medicare prescription drug program–could turn out to be one of the chief bragging points.
Gary Andres is Vice Chairman, Research and Policy for Dutko Worldwide. The firm’s clients include pharmaceutical and managed care companies.
