November 13th, 2005

Voted for Dean

Medicare Madness

One of the things that is going right with my world, as far as I'm concerned, is that I don't qualify for Medicare until April. Why? Because for people who already qualify for Medicare, the deadline for choosing your "Medicare" prescription drug plan is coming up any day now, and (as today's New York Times headlines the situation), "Confusion Is Rife About Drug Plan as Sign-Up Nears."

Medicare prescription drug coverage is yet another of those Reaganite offenses against God and man, a "public/private partnership." That is to say, the government pays for it, but the corporations get to control it and reap whatever profits they can squeeze. We, the taxpayers, assume all the up-front risk; they, the corporate owners, get to keep any of the gains while billing the government for any losses. Like all public/private partnerships, it's exactly like the situation that one guy who figured out how to get credit card cash advances on the casino ATM was in, because he knew that the law makes it illegal to lend money for the purpose of gambling. If he had won, he would have gotten to keep the money. Since he lost, he didn't have to pay the loan.

But my scruples over this awful government fad have nothing to do with why I'm dreading the day when I have to sign up for Medicare Part D. It's because I just know, with 100% confidence, that I will screw it up. I take comfort, though, in the fact that by April I'll have information that people this November can't possibly have. I get to learn from their mistakes. With any luck, the most evil, most malevolent of these plans will have been exposed by April, so with any luck, by April when I have to make my decision, I'll still screw it up, but I probably won't be able to screw it up as badly as possible.

The details that I know so far are chilling, mind-numbing. The average consumer has around 40 different prescription drug plans to choose from. Each one has different rules for which drugs are and aren't covered, for how much you're responsible for out-of-pocket before the coverage kicks in, for how much you co-pay per prescription and how that co-pay is figured, for what the coverage limit is per year, and for what pharmacies you will and won't be permitted to buy your drugs in. To get the exact right plan, you have to know, in advance, what medications you're going to need for the next several years. That includes the medications for diseases you don't know you're going to have, and medications that may not even be on the market yet. You need to know, in advance, how much those prescriptions are going to cost, despite the fact that prescription drug prices are a very political issue with a lot of movement going on right now.

And then, "knowing" those "facts" (which you can't possibly actually know), to get it right you need to collect the complete coverage rules and costs for all 40 plans. Each of those will be in a thick booklet that the salesman will try to steer you away from, and when you get it you won't be able to make any sense out of it because parts of it will contradict other parts (like every insurance plan booklet I've seen), and in the fine print the company will reserve the right to change any part of this offering unilaterally and without warning if they think the conditions warrant a change (like every insurance plan booklet I've ever seen). Then you need to codify all 40 plans in some kind of a spreadsheet or database, run your prescription-needs requirements against the resulting software, and you'll have an analysis that suggests to you which plan you should choose. But you'll only be right if you weren't lied to by the salesmen, if you understood what the salesmen were telling you, if you transcribed all of that correctly into spreadsheet formulae, and if your prescription needs forecasts are accurate.

But that's not the chilling part. The chilling part is that, reading through the New York Times article, I had a shudder of recognition. I've seen this before. This is exactly the way that long-distance calling plans work. Those of you who live outside the US are scratching your heads at this point. Those of you who live inside the US, if a shudder didn't run down your spine, you're not paying attention. As with the prescription drug plan choices described above, long distance service is sold in packages called "plans." To pick the right plan, you need to know with great accuracy how many long distance calls you're going to make in each month for the next year, for what length, to where, at what times of day. Then you call every long distance provider you're considering and try to get them to tell you enough information that you can calculate which plan is cheaper. In the end, you give up and pick one based on advertising claims that are almost certainly misleading and frequently downright false. According to the only two lengthy, in-depth studies of consumer long distance calling plan selection I've seen, nobody in America is actually on the cheapest long distance plan they could be on.

Will we see some of the same kinds of subtle and overt fraud in Medicare prescription drug plans that we see in long distance phone call plan marketing? Will they lie about what other long distance companies' plans cost, the way that Sprint used to subtly lie about their competitors in their "dime anytime" ads? (For those of you who don't remember, Sprint was taking advantage of the fact that most people had no idea what they were paying per minute for long distance. The ads, based on assumptions that weren't true for anybody, suggested that lots of people were paying 25¢ per minute, so their flat-rate 10¢/minute plan was a great deal. At the time, I was paying 3¢ per minute; Sprint's "dime anytime" plan would have tripled my long distance bill.) Or will we see a scam that I saw at the last long distance provider I worked for? They had a couple of halfway decent calling plans. They also had a "default" plan, for people who signed up with them but didn't specify which calling plan they wanted, that was (according to Consumer Reports) the single worst, most expensive, long distance calling plan in America. So their sales people would cold-call phone numbers and tell them how wonderful some specific, high-savings plan was. Then they would ask, "So, may I sign you up for (our company)?" If you said, "Yes," they would sign you up -- for the default plan. As far as they were concerned, the onus was on you to then ask for the specific calling plan, by name, that they just spent five minutes selling you. I know this because I had friends who got stuck (and some of whom I think are still stuck) trying to collect on these massively over-priced phone bills that people were sent because the sales reps tricked people into signing up for stupid plans.

What worries me the most about this is that it's a guaranteed setup for "perverse incentives," where the system is designed to deliver the most money, the most rewards, to companies that act the worst. Somewhere out there will be a company that has the highest rates and offers the least benefits. That company will make the most money per customer. That means that it will be that company which has the most money available to them to advertise on TV how wonderful and cheap their plan is. So it will be them, the most cheating, deceitful, and ruthless plan, that will be the only one people have heard of when they have to choose their prescription drug plan provider.