November 16, 2005
Choices Create Confusion
Listen to the elders complain about their new Medicare drug
benefit. You'd think that for $724 billion over 10 years, the
taxpayers could have bought them more happiness.
But no, they are angry over the program's complexity. They must
choose among dozens of plans. The plans cover different drugs,
and charge different premiums, deductibles and co-payments. Medicare
beneficiaries are now attending three-hour drug-benefit seminars
and hurling questions at their pharmacists. There are reports
of people breaking down in tears of frustration.
Such was not the vision of the free-market swingers who created
this extravaganza of confusion. They opposed adding a simple "one-size-fits-all"
drug benefit -- bland as Al Gore -- onto the existing Medicare
program. Instead, they would lead Medicare's 43 million beneficiaries
into the promised land of choice. As the swingers painted it,
private insurers would compete for the elders' affections by offering
exactly the drugs they wanted at low cost.
Only 39 percent of older Americans can figure out the options,
according to a survey by the Kaiser Family Foundation and the
Harvard School of Public Health. The questionnaire also found
that 37 percent were simply not going to sign up, and 43 percent
didn't know whether they would.
That's what happens when people are overwhelmed by choice, according
to Barry Schwartz, author of "The Paradox of Choice: Why More
Is Less." They don't make a choice. They opt out.
"The only good thing about this plan is it's better than nothing,"
says Schwartz, a professor of psychology at Swarthmore College.
"So if you have nothing, you can throw a dart and you're better
off. People who already have drug coverage (say, from an employer
or through Veterans Affairs) could throw a dart and be worse off."
The Medicare Prescription Drug Finder (at www.medicare.gov) is
supposed to help you compare plans. The finder lets you type in
your medications and up come the plans that offer them.
Several problems here. One is that the listed drugs often come
with asterisks. An asterisk may lead to the words "quantity limits,"
which means you can get only a certain number of pills a month.
Or it may instruct you to "call the plan." People calling plans
say they've been put on hold for 40 minutes before they gave up.
Let me interrupt this column with a minute of silence for the
taxpayers. The discussion so far has centered on the beneficiaries'
displeasure. What about the people who will be picking up most
of the extravagant bills?
During the 2000 presidential campaign, the conservative media
jumped all over Al Gore for proposing a drug benefit with an estimated
price tag of $253 billion over 10 years. "Mr. Gore seems unconcerned
about costs," opined The Wall Street Journal.
The newspaper much preferred George Bush's magic-of-the-marketplace
proposal. Bush insisted his "conservative" plan -- much like what
we now have -- would require only $158 billion over 10 years.
That was less than one-quarter of what it will really cost.
No doubt Gore's plan would have exceeded his estimate. But its
numbers would have been far closer to the mark than Bush's fantasy.
The plan's simplicity made it harder to conceal its true costs.
And it was based on the proven assumption that Medicare is a very
efficient health-insurance program. Medicare's indirect expenses
are only 2 percent. The overhead for private insurance companies
is 25 percent. Unlike Medicare, private insurers must advertise,
enrich their top execs and deliver a profit to investors.
These very rough calculations also assume that the time of the
beneficiaries, their children, their pharmacists, their doctors,
Medicare officials, state health and elderly affairs workers,
et al., is not worth anything. How many man-hours have gone into
explaining "creditable coverage," "true out-of-pocket costs" or
"Medicare Advantage" plans? How many gray hairs have been pulled
out in trying to get a live human being at Medicare's toll-free
number? (If you want to bother, it's 800-633-4227.)
Is no one happy with the new Medicare prescription-drug benefit?
Actually, the insurance and drug companies are happy. The insurers
have been generously cut into the deal. And Medicare law forbids
the government to negotiate prices with drug manufacturers.
Yes sir, the insurers and drug makers are real happy. As the beer
commercial says, "This Bud's for you."
2005 Creators Syndicate