TEXT OF STORY
Kai Ryssdal: Economics is, at one level anyway, the study of incentives — how people react to different costs and benefits. Health care economics is that, but way more complicated. Incentives there have been tinkered with and regulated for decades. Solutions have been found. And then unanticipated consequences of those solutions become problems in themselves, and that brings us to our next story about prescription drug benefits for seniors.
Actually, about what happens when those benefits goes away — something called the “donut hole.” From the Marketplace Health Desk at WHYY in Philadelphia, Gregory Warner reports.
GREGORY WARNER: One thing about being a pharmacist is that you have to enforce rules that you did not make.
Here at Friendly Pharmacy in North Philadelphia, pharmacist Brad Tabaac spends more time than he’d like on the phone with customers delivering bad news.
BRAD TABAAC: It’s an art form to be able to keep people happy by telling them no.
The reason Brad has to tell some of his customers “no” is that according to Medicare rules, the government only pays for a certain amount of drugs per year. Seniors who pass that limit have to pay for the rest of their year’s medication out of pocket. Suddenly a drug that they had been paying three bucks for…
TABAAC: Could be hundreds of dollars. If someone’s on three or four different blood pressure medicines, they’ll ask us, which two should we forgo, if we’re going to forgo two?
Each year over half-a-million seniors stop taking their medication because they fall into this gap in coverage.
Medicare pays up to $2,800 in drug costs. And if you’re on very expensive drugs and go over $6,400, the government will help pay for that, too. In between those two numbers is what’s known as the “donut hole:” where seniors are on their own.
The funny thing about the donut hole is that it was created by the very same bill that was passed to help seniors pay for drugs in the first place, a bill called Medicare Part D, passed in 2004.
F.M. SCHERER: President Bush wanted to get Medicare Part D without a tax increase, and the only way he could figure out to keep the costs within some kind of constraint was to have a donut hole.
F.M. Scherer is a professor at Harvard’s Kennedy School of Government. Even with the donut hole, Medicare spent about $50 billion last year on drugs. But he says the donut hole was also designed to do something else: to give seniors an incentive to pay attention to how much their drugs actually cost.
SCHERER: Actually, I’m on Medicare, and I get a quarterly report telling me exactly how far from the donut hole I am. It is a quarterly reminder that the donut hole is looming.
With enough time conceivably for a patient like Scherer to go to his doctor and say…
SCHERER: Could you get me a generic, or could you find something that’s less expensive?
Albert Wertheimer is an economist and pharmacist at Temple University in Philadelphia. The economist side of him agrees with that incentive.
ALBERT WERTHEIMER: It’s nice to make people, what do they call it now, putting some skin on the table?
But the pharmacist side of him worries that some seniors won’t get the medication that they need. And so, Wertheimer has mixed feelings about health care reform, which will eliminate the donut hole. Starting next year, big drug companies will be required to discount their brand drugs by 50 percent to seniors who fall in the hole. It’s expected to cost the companies some $3 billion a year.
But it’s not all pain, says pharmacist Brad Tabaac.
TABAAC: This donut-hole fix will definitely increase the amount of brand drugs dispensed.
Tabaac says it will give seniors less incentive to switch to generics. He says his customers already prefer brand drugs, even if getting the brand means a higher copay. It’s only when they fall into the donut hole that they reconsider.
TABAAC: Because they don’t have a choice. Because they can’t afford the brands. But I’m always left with the feeling that they’re unhappy with me. And I leave the conversation saying, I wonder if they’re going to switch pharmacies.
Brad doesn’t want to be the messenger, the one who has to tell seniors they have to pick up their own tab. And under this new donut hole fix, no one — not the government, not the drug companies, and not Brad — has to be.
In Philadelphia, I’m Gregory Warner for Marketplace.
As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.
Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.
Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.