SEPTEMBER 30, 2005 -- Federal officials announced Friday that all beneficiaries in traditional Medicare will have access to prescription drug plans that fill the so-called "doughnut hole" in coverage—one of the most criticized aspects of the prescription drug benefit offered under the Medicare overhaul law.
The overhaul law (PL 108-173) passed by Congress in 2003 left a gap in drug coverage in which beneficiaries pay 100 percent of prescription costs after they exceed a certain level of out-of-pocket spending and before protection kicks in against catastrophic drug expenses.
The gap means patients hammered with high drug costs year after year would have to pay bigger percentages of their annual drug bills than patients with relatively low yearly costs, said a study published in July in the journal Health Affairs. (See related story, July 12.)
The news, coupled with the low premiums announced last week, is a big boost for the Bush administration after months of fending off Democratic criticisms of Medicare drug benefits under the law. Many Democrats remained concerned, however, that the dozens of coverage options to be offered to seniors will prove overwhelming.
Filling the Gap
In addition to the premiums they will pay for the standard Medicare drug benefit offered under the overhaul law, beneficiaries must pay a $250 deductible, 25 percent of prescription costs between $250 and $2,250, and 100 percent of costs between $2,250 and $5,100. For costs exceeding $5,100, the government picks up 95 percent.
A Kaiser Family Foundation study released late last year estimated that one of every four Medicare enrollees in 2006 would have prescription drug spending high enough to reach the "doughnut hole" between $2,250 and $5,100 in which they would have to pay 100 percent of prescription costs.
Friday's announcement means that beneficiaries will have options to help cover the drug costs that fall into that gap. But there are tradeoffs involved. Plans that offer coverage filling the gap will typically charge premiums of $50 to $60 a month, Centers for Medicare and Medicaid Services Administrator Mark McClellan said in a conference call with reporters Friday. It's also unclear whether gap-filling coverage options would entail paying other types of out-of-pocket expenses that might be higher than in other plans.
Beneficiaries who prefer paying lower premiums can stick with options that typically would not fill the gap.
Even so, the announcement underscores the wide variety of types of coverage, premium, and deductible options Medicare enrollees will be offered starting Saturday October 1 for the year 2006. Plans are allowed to vary coverage design as long as it meets a certain actuarial minimum, and McClellan emphasized Friday that competition is spurring them to offer more generous benefit designs.
Some plans are angling for a competitive edge by substituting fixed co-payments for the 25 percent of prescription costs beneficiaries pay under the standard benefit for drug spending between the $250 and $2,250 mark. As an example, McClellan said the beneficiary in those cases would pay a $5 co-payment when filling a prescription for a generic drug, $15 for a brand name drug on the plan's formulary, and $40 for a non-formulary brand name drug.
"Everyone in Medicare, no matter what their income or how they get their health care, can choose coverage that reflects what they want, including lower cost, more complete coverage, and convenient access," McClellan said.
Beneficiaries also have the choice of getting their drug coverage through Medicare Advantage plans rather than through traditional Medicare. Many of those plans—HMOs and PPOs—won't charge any premiums for drug coverage.
McClellan said Friday that 70 percent of Medicare beneficiaries would have access to Medicare Advantage plans charging no drug coverage premiums. In some local markets, Medicare Advantage plans will charge no drug premiums for coverage that fills the "doughnut hole" gap, added CMS spokesman Gary Karr.
Too Many Options?
But all of the options mean greater potential for beneficiary confusion, Democrats said Friday.
In California, for example, 47 drug plans will be offered in traditional Medicare along with 113 Medicare Advantage drug plans, said Rep. Pete Stark, D-Calif. (many of the 113 will be offered only regionally, however).
Sen. Max Baucus, D-Mont., said he welcomes the news about affordable coverage but cautioned plans against confusing seniors.
"Over 40 benefit designs will be offered from 21 different organizations in Montana," he said. "The number of benefits designs will greatly exceed 70 in several other states, like California, Florida and New York."
Baucus also worried about the marketing of drugs plans, which can begin Oct. 1 by print or radio or—for the first time under Medicare—direct telemarketing to beneficiaries' homes. He urged firms to "market their plans appropriately and strictly within the guidelines established by the program."
Karr noted that plans cannot telemarket to beneficiaries on the Federal Trade Commission's "do not call" list.
