By Kristen Gerencher
MarketWatch
December 29, 2006

The ways in which consumers pay for and receive health care began to shift this year and many of those changes will be felt even more strongly in 2006.

The biggest news involved Medicare, the federal health-insurance program for Americans 65 and older and the disabled, which began enrolling people for its new prescription-drug benefit that starts in January.

This year also saw an increase in nutrition awareness, turmoil at the Food and Drug Administration and a new government response to infectious threats. Plus, more employers struggling with rapidly rising health-care costs eyed high-deductible "consumer-driven" medical plans, which shift costs and responsibility to workers.

In addition, health-care cost hikes far outpaced wage increases yet again this year, the number of people without health insurance continued to climb and more workers lost access to employer-sponsored coverage.

Here are six developments likely to affect consumers in 2006:

1. Medicare's drug benefit faces first big test

Medicare's transition from a temporary discount-card program to full-blown drug coverage under what's called Part D represents the biggest change to the program in its 40-year history. But is has quickly raised problems as many seniors confront a bewildering array of plans from the host of private insurers participating in the program.

"The surprise of the year was how many health insurers...decided to offer free-standing prescription-drug plans," said Paul Ginsburg, president of the Center for Studying Health System Change. "Now the issue is, is the huge number of plans when combined with the complexity of benefits going to inhibit take-up of this benefit?"

Apart from Medicaid beneficiaries who were automatically enrolled, only about 1 million of the 42 million potential Medicare beneficiaries voluntarily have enrolled in a drug plan so far. They have until May 15 to sign up before a 1% per month penalty is assessed. Read more on Medicare Part D choices.

Some critics have blasted the six-month penalty-free window as too short a time for people to make an appropriate choice. But Ginsburg hopes politicians won't extend the deadline because he said it serves as an important motivator.

"Since [Medicare Part D] is subsidized pretty heavily, I don't see a problem with expecting people to make a choice and having these penalties to encourage them to do it now," Ginsburg said. "You want to get everyone enrolled, including people who are healthy now and who may very well need the benefit later."

The success of the program depends on how many and what kind of people sign up for the benefit, and it's unclear whether both healthy and sick are turning out yet, said Jonathan Oberlander, associate professor of social medicine at the University of North Carolina-Chapel Hill.

There may be a surge in enrollment around May 15 as people scramble to avoid the penalty, he said. "My guess is next year, next sign-up time, there will be less confusion but maybe fewer choices, too."

Among the biggest unknowns is whether employers that offer retiree health benefits will retain them next year, he said. "Those decisions are going to reverberate for consumers."

2. Employers realize the limits of high-deductible plans

While many companies are either offering or considering offering them, few have made the move to totally replace traditional coverage with the newer high-deductible models, Ginsburg said.

"We know most spending goes for a relatively small number of people who are very sick, and consumer-driven plans are not going to have much effect on them," he said, noting that 10% of the population accounts for 70% of health-care spending. "Half of hospitalizations are admitted through the emergency room. That doesn't jive with the model of the highly-informed consumer making choices."

Only 1.29 million Americans, or 1% of the working-age population, are covered by a consumer-driven plan such as a health reimbursement account (HRA) or health savings account (HSA,) according to a recent study from the Employee Benefit Research Institute and the Commonwealth Fund. About 10.8 million, or 9%, are in high-deductible plans with no associated savings account. Learn more about high-deductible plans.

"There's no doubt you'll see more employers move to them and more cost-shifting to employees," Oberlander said. "The question is, what does that do to the risk pool of the other insurance plans and is there a backlash?"

"In the short term, there may be a little bit (of cost containment,) but I'm very skeptical it's going to do anything in the long term," he said. "It really matters how the healthy middle class, the worried well, feel about this."

3. Nutrition gets a higher profile

Jan. 1 marks the beginning of FDA-required trans fat labeling on food packaging, a move that should make it easier for consumers to track and control one of the potentially harmful elements of their diets.

Trans fat, found in many processed foods, is linked to increased risk of heart disease. Products that have been reformulated to reduce or eliminate trans fat content likely will say so in large print, and those that still have ample amounts will have to disclose it. Eight common food allergens also have to be spelled out on labels.

Also, expect ongoing attempts to tone down aggressive advertising of high-calorie, low-nutrient foods and beverages to children. With more overweight and obese kids in the U.S., companies have to take seriously the Institute of Medicine's recent landmark report that documents the impact of such marketing on kids' long-term health risks. See related Vital Signs.

Vending machines in schools and TV spots hawking junky juvenile food during kids' programming will be two of the lightning-rod issues.

4. Emergency preparedness for infectious threats

After Hurricane Katrina devastated the New Orleans area and bird-flu outbreaks prompted pandemic fears around the globe, much-needed disaster-planning funds followed, said Georges Benjamin, executive director of the American Public Health Association.

"This year we really started planning in earnest. That will continue next year."

5. Tension between science and politics continues

In one example of the turmoil surrounding the FDA, the agency's own advisory panel deemed that the emergency contraceptive Plan B was safe and effective and recommended its over-the-counter sale. But the FDA in August delayed ruling on it indefinitely, violating a promise it made to Congress.

The announcement led to the departure of Susan Wood, one of three high-ranking officials who parted ways with the embattled agency in 2005. It still has no permanent commissioner.

"This has been a very bad year for the FDA and I hope that can right itself," Benjamin said. "It's a very important agency to protect consumers."

6. Long-term care finds its way back on the agenda

Creating a comprehensive strategy for long-term care was high on geriatric experts' agenda during this year's White House Conference on Aging, which meets only once a decade to set policy priorities.

With many states engaging in their own health-care reforms and footing ever bigger bills for Medicaid, solving what may be a pending crisis among the elderly remains daunting, Oberlander said. "This is the elephant in the room that no one wants to see. It's a very expensive problem and a complicated problem."