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Seniors See Foreign Drugs as Benefit Over Medicare

Some people are opting out of the U.S. program to order from Canada and cut their costs.

January 30, 2006|Lisa Girion | Times Staff Writer

Medicare's new drug plan was supposed to help people like Charlotte and Walter Kuglin -- retirees living on a modest income who pay for their prescriptions out of pocket.

The Florida couple are among the millions of seniors too well off for Medicaid but not lucky enough to retire with employer-based drug coverage.

The Kuglins, however, decided not to enroll in the landmark government program, known as Medicare Part D. They figure they will spend less buying their drugs the way they have for more than three years -- by mail from Canada.

"When you are on a fixed income like we are, you have to watch every penny," said Charlotte Kuglin, a 75-year-old retired nurse anesthetist.

Many seniors have yet to sign up for Medicare drug coverage because they are confused by the array of plans -- each with its own premiums, co-pays, deductibles and lists of covered drugs and participating drugstores. But others are making a calculated choice to opt out -- and buy from foreign pharmacies instead.

These seniors are not bothered by the idea of relying on prescriptions filled by foreign pharmacists. Indeed, some say they prefer the ease of shopping by mail over schlepping to the drugstore.

And many have accepted the risk of paying a penalty if they change their mind and sign up for the Medicare program after the May 15 deadline. What matters most is how much they are spending now.

"By the time I factored in the monthly payments, deductibles, etc., the Medicare prescription drug plan offered me no greater benefits than buying my drugs from Canada," said 72-year-old Pat Virden of Greenbelt, Md., another retired nurse, speaking at a recent congressional hearing.

Half of the $1.5 billion worth of drugs shipped by foreign vendors into the U.S. each year comes from Canada. RxNorth, a Minnedosa, Manitoba-based mail-order pharmacy, reports a small slowdown in orders from its biggest base of customers -- American seniors -- since Medicare launched the drug program Jan. 1. But Chief Executive Andrew Strempler said he wasn't worried.

"Medicare is not going to put us out of business," he said.

For many, "we're still significantly less expensive than Medicare," Strempler said.

Although some seniors may decide they don't need Medicare drug coverage right now, experts say Medicare needs them -- or at least their premiums.

If too many relatively healthy seniors opt out of the government plan, the Kaiser Family Foundation warned in an October study, the program could be in trouble.

When the administration estimated the costs of the program, it assumed that most eligible seniors would sign up, with healthy seniors balancing sicker retirees who need more drugs, said Tricia Neuman, director of the foundation's Medicare policy project.

"If the group that signs up has substantially higher average costs than the pool of eligible people, then premiums would rise faster than the administration projected," Neuman said. Eventually, the Kaiser study said, Medicare drug plans could tip into what economists call the "death spiral."

"Every time you raise rates, you chase more healthy people out of the system," industry consultant Robert Laszewski said.

That could also make Medicare drug coverage unprofitable for some of the insurance companies that are offering the plan, Laszewski said. "If you are in the insurance business, you don't want just the sick people signing up."

It's unclear how many seniors have decided to opt out of the program. Health and Human Services administrators recently said that the number of people enrolled as of Jan. 1 was "on track" to reach their goal of at least 28 million by May 15.

But some insurance experts and healthcare advocates say it is troubling that of the 14.3 million people enrolled at the start of the year, only 3.6 million had signed up on their own.

The rest were automatic transfers from state Medicaid rolls or already had drug coverage through Medicare Advantage HMOs.

"For all the hullabaloo and all the expenditures, they've only added somewhat more than 3 million people," said Ron Pollack, executive director of Families USA, a healthcare advocacy organization. "That's horribly disappointing."

For seniors with major health problems, the Medicare drug plan is more than a good idea -- it is an economic lifeline.

These people can count on quickly spending more than the typical annual deductible of $250. They know that within a few months they will spend through the so-called doughnut hole -- a gap built into most plans that requires enrollees to pay out of pocket after the first $2,250 until catastrophic coverage kicks in at $5,100.

But about 25% of eligible seniors -- as many as 7.4 million people -- could find that buying drugs on their own would cost less than they'd spend on premiums, co-pays and other expenses that come with the Medicare plan, according to another Kaiser study published in 2004.

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