Improving the Medicare Drug Discount Cards 
Jeff Lemieux
June 22, 2004

With a few technical fixes and one big attitude adjustment, the Medicare-approved drug discount cards will be a successful new model of a public-private partnership, helping millions of senior citizens at a modest cost to taxpayers.  A new pamphlet by Joe Antos and Ximena Pinell of the American Enterprise Institute helps explain the discount card initiative and its potential. 

A big hurdle in Washington will be getting over the "government program" mentality.  For the discount cards, this mentality has two problematic effects:  (1) it leads to unrealistic (or even bizarre) expectations and demands, especially from critics, and (2) it has caused Medicare officials to create an intimidating, user-unfriendly enrollment system. 

Note to readers -- the sections below contain "live" versions of the drug card enrollment screens at www.medicare.gov as of June 21, 2004.  The various links and forms might not work as advertised -- we're showing them here to make a point, not to actually facilitate enrollment.

Outline:
A Government-Enabled Private Option or an Entitlement Program with Private Contractors?
Suggestions for Improving the Card Enrollment System
  Making Medicare.gov and 1-800-MEDICARE More Consumer-Friendly
  Repealing the Lock-In Rule
  Auto-Enrollment for Medicaid "Extra Assistance" Recipients
Perspective -- The Number of Cards Isn't the Problem

It's a shame when political partisans can't acknowledge the other side's good ideas.

One case in point is the Medicare-approved drug discount cards, which were initiated on June 1.  The cards have a low annual enrollment fee ($30 or less), and low-income seniors get $600 in extra benefits toward their drug purchases.

The discount cards were a Republican idea, pushed by President Bush's Medicare administrators and supported by the center-left Progressive Policy Institute and a host of conservative think tanks.  They are one of the least costly and potentially most helpful features of the 2003 Medicare Modernization Act.

Yet there has already been a torrent of breathless criticism, mostly from Democrats:  "The cards are too confusing," "There are too many cards to choose from," "The discounts aren't as deep as the Veterans' Administration can get for certain drugs," and so on.

To a large degree, these complaints reflect a profound misunderstanding about what public-private partnerships are supposed to do.  (Some of the criticism probably stems from disappointment that the cards aren't run directly by the government.)

However, criticism of the enrollment process is valid.  

First, both the 1-800-MEDICARE service and the www.medicare.gov website need to be much more inviting and easier to use, for both seniors and their families.  

Second, Congress should allow seniors to switch cards whenever they wish. 

Third, seniors who have already applied for extra financial assistance through Medicaid should get discount cards (and the extra $600 cash assistance) automatically, or at least via an expedited or assisted process. 

A Government-Enabled Private Option or an Entitlement Program with Private Contractors?  Health policy analysts are trained to believe that government programs should be run by government officials, with well-defined regulations and strict rules.  This mentality is taught in public policy schools -- it permeates the way we think about anything the government tries to do in health care. 

With government-run programs, the bottom line is obvious -- the government is in charge.  Private companies may be contractors, and may even have a degree of discretion.  But the government is the responsible "owner" of the program, and government officials ultimately make the rules. 

The Medicare-approved discount cards represent a different type of government program.  They are more like a government-facilitated private purchasing option.

The discount cards are best understood not as an old-fashioned government entitlement program that happens to depend on private contractors, but instead as a new private-sector product, established and endorsed by the government, and marketed in cooperation with Medicare.  The distinction may seem subtle, but it will be very important to the cards' ultimate success. 

Here's an example of the different mentalities:

1.  Government Program Mentality -- "There is a new drug benefit available to qualified Medicare beneficiaries.  If you think you might be eligible, you may approach the government, allow us to verify your eligibility criteria, and we will then steer you to the appropriate benefit, including enhanced benefits for eligible individuals with low incomes."

2.  Public-Private Purchasing Option Mentality -- "Hey Seniors!  Get better prices for the drugs you buy.  Medicare has deals with a list of approved discount cards.  We can't guarantee you'll save a lot, but most seniors will.  Buy a discount card for $30 a year or less, and you could start saving money now!  SPECIAL BONUS OFFER:  If your income is less than $1,000 month, you can get guaranteed discounts worth $600 a year or more."

The government program mentality is common.  The language is bureaucratic, and the message is "If you're willing to go through a lot of hassle and prostrate yourself before a government agency, you may qualify for public charity."

This message is part of the reason why many low-income seniors don't take advantage of medical assistance programs for which they are eligible.  It is also part of the reason that enrollment in the discount cards has been slower than expected.

The public-private mentality is better.  It doesn't guarantee anything -- it doesn't imply that there is an entitlement.  It simply says that the government is trying to help seniors get a good deal. 

The public-private mentality message is "In the end, you pay your money and take your chances.  But Medicare helped arrange these deals, and we'll explain which one might be best for you and do our best to monitor that the discount card companies behave properly."

Of course, even this message might be a little too pessimistic.  Seniors can choose a free card (there are several available without enrollment fees).  In that case, there's no risk at all.

But if Medicare embraced the public-private mentality, it would have two profound effects.

First, it would reduce expectations.  Right now, members of Congress are hearing from seniors who expect this to be a traditional government program, with rules for every contingency.  "What if my discount card goes out of the business -- will I still have to pay another $30 to get a new card?" 

Seniors are thinking of the card companies as government contractors -- private plans operating a government program -- rather than as independent actors, offering a government-endorsed product. 

In the case of the drug discount cards, that's a mistake.  People need to take responsibility for purchasing a discount card.  The cards won't work as well if seniors believe the government is just supposed to give them something (provided they jump through the right bureaucratic hoops).

Suggestions for Improving the Card System:  The public-private mentality may be the right way to describe and operate the Medicare drug discount card program, but it's not working that way so far.

To be fair, Medicare has made an enormous effort to get the discount card program up and running in only 6 or 7 months.  The fact that we have an operational website and toll-free phone service is close to miraculous.

However, both the website and the phone service need to be fundamentally restructured, or at least re-ordered, so that people can learn about the cards first, and answer questions about their eligibility criteria later.

The next section walks through the actual website "pages" or screens that users see.  (The order of the questions is similar for users of the phone system.)

If users are persistent enough, there is some terrific information available on the prices available through the cards, in different parts of the country and for different drugs. 

But it takes far too long to get to that good information.

Making www.medicare.gov and 1-800-MEDICARE More Consumer-Friendly.  The main problem with the discount cards is the enrollment process itself.

There are two main sources of information on the card program:  the www.medicare.gov website and the 1-800-MEDICARE toll-free phone line. 

Fixing Medicare.gov.  Medicare has done a great job creating a website that can display exactly how much seniors could save on their medications using the various cards. 

But the enrollment procedures are intimidating, and are very difficult for seniors (and their families or friends) to use.  Basic information, like:

"What is the full list of card plans, and what are their fees, basic characteristics, and contact addresses?" 

"Which cards work seamlessly with existing low-income or hardship programs offered by drug companies?"

"Which cards operate in my state, and which are nationwide?"

is buried deep within the system, accessible only after a series of intimidating screens that will undoubtedly discourage many potential applicants.

For example, Screen 1 shows what you see when you go to Medicare's consumer website.


Screen 1.  "Medicare.gov" 

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Features >>

Find available Medicare-approved drug discount cards, and compare prices for your prescriptions Facts You Need to Know About Medicare-Approved Drug Discount Cards Enrollment Information for Medicare Approved Drug Discount Cards New Publications about the Medicare-Approved Drug Discount Cards

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This first screen certainly isn't catchy.  It doesn't say "Click here to Choose a Medicare-Approved Drug Discount Card" or "Click Here to Find the Best Card for You."

But it's not bad.  Most seniors or their family members would probably choose "Find available Medicare-approved drug discount cards..."  or "Enrollment Information..."

Choosing "Enrollment Information" leads to a page full of questions and answers, and a mysterious set of enrollment forms.  It's doesn't really provide any information on the cards themselves.

For information on the cards, users must choose the top option "Find Available Medicare-approved drug discount cards..."

This brings up a screen that starts with a bunch of unnecessary verbiage (see Screen 2 Top -- note, the formatting errors are in the original).


Screen 2 (Top).  "Find Available Medicare-Approved Drug Discount Cards... "

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What you will need to get started.

Welcome to the Prescription Drug and Other Assistance Programs section of www.Medicare.gov. This section provides information on public and private programs that offer discounted or free medication, programs that provide help with other health care costs, and Medicare health plans that include prescription coverage.It also provides information on even more ways you can reduce your prescription drug costs, such as by using generic alternatives.

Medicare-Approved Drug Discount Cards

This site now has information about the new Medicare-approved drug discount cards. Most people with Medicare can get a Medicare-approved drug discount card. If you choose to enroll in a Medicare-approved drug discount card one month, you can start saving by using your discount card as early as the first day of the next month.

More information about Medicare-approved drug discount cards is available in the Guide to Choosing a Medicare-Approved Drug Discount Card.

What you will need to get started.

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At this point, you have two real choices, scrolling down further or clicking on the rather insistent "What you will need to get started" sidebar.

Here is what you get if you click on the sidebar:


Sidebar.  "What You Will Need To Get Started"

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Note: This tool is entirely confidential. We will not save or share the information you provide with anyone for any purpose.

Step 1 of 2 - Please answer the following questions:

Step 1a: Please answer the following questions

1. Do you have Medicare?	select oneYesNo
2. Are you receiving any of the following?  Help	Outpatient prescription drug benefits under your State Medicaid Program (your state may call this Medical Assistance) TRICARE (military health insurance) FEHBP (health insurance for Federal employees or retirees) Other health insurance coverage that includes prescription drugs, such as employer/retiree plans or some Medicare managed care plans(does not include coverage through a Medicare + Choice plan or Medigap policy) None of the above
3. Please enter your ZIP code in the following text box.	ZIP Code Locator

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Again, this isn't too bad.  A senior knows his zip code and can easily select "yes" on the Medicare question and "None of the above" on the question about insurance coverage.

However, hitting the "Continue >" button leads to the disastrous Screen 3.


Screen 3.  "Step 1b"

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Step 1b: Please answer the following additional questions

4. Are you using an Indian Health pharmacy?  Help	select oneYesNo
5. Do you live in a Long Term Care facility and receive your prescriptions from a pharmacy that serves that facility?  Help	select oneYesNo
The following questions may help you find programs to assist you with your prescription or other health care costs. These questions are optional:
6. Are you married?  Help	select oneYesNo
7. Which monthly income level best describes your situation? What's included in my income?	Select an Income Range 0 - 999 1,000 - 1,999 2,000 - 2,999 3,000 - 3,999 4,000 - 4,999 5,000+
7a. Please further choose a narrow income range to help us determine what programs are best for you.	Select an Initial Range first
8. Which level best describes your financial resources (including bank accounts, stocks, bonds, but excluding your house, a car, burial plots, furniture, some life insurance)?	Select a Resource Range 0 - 999 1,000 - 1,999 2,000 - 2,999 3,000 - 3,999 4,000 - 4,999 5,000 - 5,999 6,000 - 6,999 7,000 - 7,999 8,000 - 8,999 9,000 - 9,999 10,000+

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Now, we're in trouble.  Some self-respecting seniors won't keep going at this point.  And it's not likely their children or friends can help.

Screen 3 is obnoxious.  But let's assume the senior gets past Screen 3, and hits "Continue >"

Now we get to the real meat of the enrollment process, Screen 4, where you must enter the drugs you are taking.


Screen 4.  "Drug Selection"

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Step 2 of 2 - Please Select Your Prescription Drugs

If the potential enrollee hasn't given up, and he or she has the stamina to scroll through the hundreds of drugs in the list, the good information finally starts to become available.

First, the website notes special low-income or hardship assistance programs run by drug companies that may be available, and points out how to contact those companies to apply.  This is very good information.

Second, the website notes whether or not you might be eligible for the extra $600 in assistance.  Again, great to know.

Third, the website finally gives you a list of the plans that are available, including some notes on whether or not they are nationwide plans, the amount of their enrollment fee, contact information, and so on.  Excellent stuff.

Finally, the website has a brilliant "Price Comparison" button -- the real heart of the system -- which allows you to figure out which card has the best prices for your particular list of drugs.  This service allows seniors (and researchers) to see which card has the deepest discounts, and it has the potential -- just the information service alone -- to make the drug market more competitive.

But it's just too hard to get to this point.

The website should start with lists of available cards, and a list of cards that offer seamless coordination with existing low-income programs.

Then, for users who want to enter their drugs, the next step should be to jump straight to the price comparisons. 

At every point in the process, sidebars should allow users to "click here to see if you are eligible for the extra $600 in discounts."  Then, people could type in their income information.  There should be options like "click here to see if you qualify for extra discounts sponsored by some drug companies or groups."  Then, people can type in their asset information, if necessary.

Finally, eligibility information should be gathered last, after an enrollee had selected a card.  This will mean that some people will find out they're not eligible after they've already done quite a bit of work.  That's OK.  It's better that some folks are disappointed at the end, than for many more potential enrollees to be turned off by intimidating eligibility screens at the start.

Fixing the 1-800 Medicare Service.  The problem with Medicare's toll-free phone service is that operators are going through the exact same screens as the website.  (In fact, they're probably just using the website themselves.)

Therefore, the first words out of the operators' mouths are questions:  name, eligibility information, zip code, income, drugs used...

If a prospective enrollee has all of that information ready, then the system works.  But if they just want more basic information, the system has more difficulty.

For example, I tried to enroll my father in a card.  He doesn't take any medications.  I just wanted to get him one of the nationwide cards with no fee.  I figured he could keep it in his wallet.  If he needed an expensive prescription at some point, he could call the 1-800 number on the back of the card to go to a pharmacy that participated with his card.

The Medicare operators couldn't figure out how to handle that request.  Since we didn't have any drugs to enter into the system, the system couldn't respond.  (Eventually, we just made up some drugs to get the system to list the available cards.)

Medicare's phone operators should just tell callers up front that there's a whole long list of cards, some have fees and some don't, some are nationwide and some aren't, and they each cover different drugs and work with different pharmacies or mail-order services.

Then, the operators should ask the callers what they want.  Are they on lots of medicines already?  Or not?  Are they a Medicare beneficiary or are they calling on behalf of one?  Are they ready to pick a card, or do they just need more basic information?  Did they know that if their income was less than $1,000 a month ($1,400 if married), they could get automatic discounts on any drugs worth up to $600?

These sorts of basic questions would make the process less intimidating than just being asked a list of pre-canned eligibility questions right from the start.

Repealing the Lock-In Rule.  It's just basic logic.  Medicare can't tell seniors and their families that the discount card program doesn't really guarantee them anything and that they must take responsibility for purchasing a card, and then forbid them from changing their minds once they've made a choice.  Congress should rush to enact clarifying legislation allowing seniors to switch discount cards whenever they want.

If we want seniors to treat the discount cards like an entitlement, then it's fine to add lots of incomprehensible rules and restrictions.  However, if we want seniors to understand that this program is a government-arranged private purchasing option, then people need to be able to change their minds and switch cards if they feel like it.

Seniors rightfully ask:  "What if my prescriptions change?  Why can't I switch to a different card that gets me a better deal.  It's my $30, isn't it?"

If this were a classic government entitlement program, the rules would be the rules, and seniors would just have to accept them. 

But this is supposed to be a publicly-sponsored private option.  If people can change their minds and go to a different barber shop, why can't they change their minds and go to a different discount card?

Besides, having enrollees who are locked-in isn't particularly advantageous for discount card operators.  It would be much better for them (and for seniors) if, by repealing the lock-in rule, more seniors enrolled in the cards in the first place.

Auto-Enrollment for Medicaid "Extra Assistance" Recipients.  Very poor seniors are eligible for Medicaid benefits (including drugs) in addition to their Medicare coverage.  Medicaid programs are run by the states, with substantial federal funding.

Medicaid also offers extra assistance with Medicare premiums and cost-sharing to some seniors whose incomes are at or near the poverty line, but are too high to qualify for full Medicaid benefits. 

However, because the enrollment process is so difficult, many seniors who would be eligible for the extra premium and cost-sharing assistance don't bother to apply.

But some do, and virtually all of those people would also qualify for the $600 in extra drug assistance available through the Medicare cards.

Democrats have suggested that all Medicaid enrollees receiving extra assistance get a Medicare drug card automatically.  That is a good idea, but the question is:  Which card?

States, seniors' organizations, and consumer groups should offer assistance in selecting a Medicare drug card.  Others could be notified that if they don't select a card by a certain date, they will be automatically enrolled in a card with service in the state. 

Medicare and the state Medicaid officials could set out criteria for ranking the best cards in the each state, based on the size of the discounts they provide, the breadth or scope drugs covered, their linkages with pre-existing drug discount programs, and so on.

Automatic enrollment could then be based on these rankings.  For example, if a state found that three cards were particularly good -- equally ranked but considerably better than all the others -- they could allot the automatic enrollees to those three top-performing cards by a random selection process.

Perspective -- The Number of Cards Isn't the Problem:  Several members of Congress and commentators have suggested that confusion over the discount cards would be lessened if there were only 3 or 4 cards to choose from.

That's probably true, but restricting the number of cards could have the effect of throwing the baby out with the bathwater.

It is a considerable investment to develop a card proposal, negotiate for discounts with drug companies and pharmacies, and market the product.  If plans didn't think they could get federal approval, lots of potential innovators might just skip the process.

In general, the economics of health care underscores a tension between what's best in the short run and what's best in the long run.  In the short run, limiting the number of competitors in a market-based system can be advantageous.  Rivalry between a few large competitors can be more efficient and less chaotic than competition among a large number of companies.

But in the longer run, it's almost always better to keep markets open to as many competitors as possible.  With only a few big competitors in a marketplace, regulators might never have the courage to kick them out, even if they underperform.  There would be too much disruption to enrollees.

Moreover, a market where only a few competitors have concentrated their market share can get lazy, or resistant to innovation.  If smaller, nimbler competitors are locked out by the process, the big guys can quickly lose their edge.

Of course, the Medicare discount card program is only supposed to last until December 2005.  So in that sense, fewer competitors might be better over the next 18 months.

However, many health policy analysts believe the discount card program will be successful (once the enrollment glitches are fixed), and that the program will be extended into 2006, and possibly indefinitely. 

Therefore, it makes sense to allow the extra competition to flourish in the program, with dozens of competitors.  Those with weak offerings will soon drop out anyway.  And Medicare will ultimately be left with a stronger, more competitive and innovative discount card system.

Links:
American Enterprise Institute Private Discounts, Public Subsidies:  How the Medicare Prescription Drug Discount Card Really Works by Joseph Antos and Ximena Pinell

Centrist Policy Network Democratic Leaders Should Embrace the Drug Discount Cards (June 2, 2004)

Centrists.Org Detailed Issue Summary:  Medicare Modernization Act of 2003 (May 15, 2004)

Centrists.Org Conservative Health Scholars Urge "Fix" to Drug Benefit, Building on Discount Cards (May 26, 2004)  

Centrist Policy Network. Medicare Follow-Up?  (January 4, 2004)