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Newsletter Article


'Doughnut Hole' Estimates Vary Greatly

By Mary Agnes Carey, CQ HealthBeat Associate Editor
September 21, 2006 -- House Democrats said Thursday that nearly 7 million Medicare beneficiaries were at risk of falling into the drug benefit coverage gap, while administration and health insurance industry official officials said the number was closer to 3 million.

Within the coverage gap, known as the "doughnut hole," Medicare drug plan enrollees are required to pay a greater share of their drug costs until the program's catastrophic drug coverage begins.

After meeting a $250 deductible, the government pays 75 percent of prescription costs but stops paying altogether when a beneficiary's out-of-pocket spending reaches $2,250. Medicare picks up none of the prescriptions costs between $2,250 and $5,100 in out-of-pocket outlays, after which it pays 95 percent.

In a report released Thursday, House Democrats said that in 26 states, more than 90 percent of beneficiaries are enrolled in drug plans that have a gap in coverage. The report also found that 84 percent of private drug plans offered nationwide have a coverage gap. The study excluded beneficiaries who enrolled in Medicare Advantage coverage—which provides both health and drug benefits—and dual eligibles who receive low-income subsidies.

"Despite Republican claims to the contrary, this report shows that millions of people are likely to fall into the doughnut hole, leaving them without coverage when they need it most," said Rep. Pete Stark of California, the ranking Democrat on the House Ways and Means Health Subcommittee. "The opportunity to purchase plans that fill that hole is a mirage."

Centers for Medicare and Medicaid Services Administrator (CMS) Mark B. McClellan said the Democrats' findings are based on a 2004 study "that everyone knows is outdated" and was done before the latest estimates of the drug benefit's cost. He also said that many Medicare beneficiaries have selected drug plans that cover the drug benefit's deductible and coverage gap.

Separately Thursday, America's Health Insurance Plans, a trade group representing health insurers, said health insurance plan data show that about 10 percent of Medicare drug plan beneficiaries have reached the gap so far, with approximately 3 million expected to do so this year.

"Health insurance plans have exceeded expectations by ensuring that millions of beneficiaries receive prescription drugs at lower out-of-pocket costs than previously predicted and by preventing millions from ever reaching the gap," the group's president and chief executive officer, Karen Ignagni, said in a statement.

During an afternoon news conference, McClellan outlined a series of steps CMS has taken to make it easier for beneficiaries to sign up for the drug benefit or change plans when enrollment for 2007 begins Nov. 15.

Changes to Medicare's "Drug Plan Finder," which will be available mid-October, will make it easier for beneficiaries to compare plan features such as prices, benefits, and out-of-pocket costs, McClellan said. Complaint information about drug plans also will be posted on the drug plan finder. The 2007 version of the "Medicare & You" handbook, which explains Medicare coverage and is sent annually to beneficiaries, will highlight preventative services available to beneficiaries.

While 92 percent of Medicare drug plans have received at least one compliance letter from CMS, the number of complaints CMS has received about health plans has declined, McClellan said. In July, CMS received approximately 1.4 prescription drug plan complaints per 1,000 Medicare beneficiaries enrolled in those plans. In June, the figure was 1.7 per 1,000, McClellan said.

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