Robert Powell has been a journalist covering personal finance issues for more than 20 years, writing and editing for publications such as The Wall Street Journal, the Financial Times, and Mutual Fund Market News.



BOSTON (MarketWatch) -- Since 2006, some 45 million Americans have had the opportunity to enroll in a Medicare Part D prescription-drug plan. And since that time, policymakers, adult caregivers and many others have wondered whether these plans are a good deal or not. Today we learn that the answer is "yes, but..."

According to a report published Thursday in the New England Journal of Medicine, the Medicare drug benefit has indeed helped seniors who lacked drug coverage before.

But there's plenty of room for improvement, according to Tricia Neuman, director of the Medicare Policy Project at the Henry J. Kaiser Family Foundation, the co-author of the report. Here's a look at what Neuman and her co-author say needs fixing.


1. Simplifying the choices

Established under the Medicare Modernization Act of 2003, Medicare Part D provides beneficiaries access to a government-subsidized prescription drug benefit offered by private insurers and pharmacy-benefit managers. Medicare Part D also provides beneficiaries with some of the most mind-numbing exercises ever created.

Consider: there are nearly 4,000 such plans sold throughout the country, though thankfully you have to sort through only 50 or so where you live. Among those 50 or so plans, you have to decide whether you want the standard benefit or some variation on that benefit. By the way, the "standard benefit" for Part D plans consists of a deductible, 25% coinsurance up to an initial coverage limit, a gap in coverage in which enrollees pay the full cost of their prescriptions (often referred to as the doughnut hole), and catastrophic coverage.

On average, that standard benefit would cost about $35 per month. Trouble is, according to Neuman's report, most Part D sponsors don't offer the standard benefit. Instead, plans vary widely from one to another. Some cost as little as $10 a month; others as much as $136 a month. In some plans you might pay $20 for a supply of your meds, or as much as $88 in another.

Suffice to say three things. 1) It's a lot to think about. 2) What mad man would make seniors have to think this hard about something precisely when they might be losing something on their fastball? 3) Lawmakers would serve seniors well by simplifying the choices here. (Note to lawmakers: Read "The Paradox of Choice" by Barry Schwartz.)

2. Improving coverage

The big goal of the Medicare Modernization Act, according to Neuman and her co-author, was to provide access to drug coverage to beneficiaries who didn't have such coverage in another plan. And on this front, the news is mainly, though not entirely, positive. By June of 2006, 90% of beneficiaries had prescription-drug coverage. The bad news: Some 4 million Medicare beneficiaries didn't have drug coverage in 2006 and that's still true today. What's more, the report suggests that those who don't have coverage could face "substantial penalties" if they delay enrolling in Part D in the future.

3. Closing the coverage gap

Most plans don't offer coverage for the gap between the initial coverage limit and the catastrophic limit and that's likely to continue, especially because of adverse selection. Still, Neuman and her co-author think reducing or eliminating the gap would make sense. There's "growing evidence that the gap is posing problems for enrollees," they wrote.

Note: Health-reform legislation now before the House Energy and Commerce Committee would provide much-needed help to older adults and people with disabilities who face skyrocketing drug costs. The bill phases out the coverage gap, or "doughnut hole," in the Medicare drug benefit over time and pays for it by securing lower prices for drugs covered under the benefit.


4. Improving coverage for low-income beneficiaries

"There are some two million Medicare beneficiaries who are eligible for but not receiving low-income drug subsidies and more could be done to improve participation rates," the authors wrote.

5. Reducing prices and spending

The authors say that federal spending on Medicare Part D has been lower than initially projected, but that more could still be done to reduce drug prices and rein in overall drug spending. For instance, the government doesn't negotiate costs with drug makers. But Uncle Sam could save a buck or two by negotiating for single-source drugs with no close substitutes.