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Study Predicts Medicare Drug Plan Gap Harder to Fill in 2007

By Mary Agnes Carey, CQ HealthBeat Associate Editor

November 1, 2006 -- Coverage to close the Medicare drug benefit's "doughnut hole" will be harder to find and cost more in 2007, according to a Families USA report that the Centers for Medicare and Medicaid Services labeled "a distorted and incomplete picture" of coverage choices offered to beneficiaries.

The report, released on Wednesday, concludes that in 13 states no drug plans will offer "meaningful coverage" in the "doughnut hole," the gap in coverage in which beneficiaries must pay costs out of pocket when their drug costs total between $2,251 and $5,100, after which catastrophic coverage begins.

The report defines "meaningful coverage" as coverage for a list of 25 drugs most commonly prescribed to seniors in 2004 in a Pennsylvania pharmaceutical assistance program, some of which are listed twice but by different dosage amounts. The analysis states that of the 25 drugs, 18 are not available in a generic form, and therefore are likely not covered because most plans that offer coverage in the gap cover generic drugs, not brand-name drugs.

The report predicts that the number of beneficiaries without access to "meaningful" coverage in the gap will rise from 375,000 this year to 6.6 million in 2007—an 18-fold increase. The figures include all Medicare beneficiaries with drug coverage as of June 2006. Not included are two groups who do not face a coverage gap—"dual eligibles," or beneficiaries who qualify for both Medicare and Medicaid but now receive their drug coverage in the Medicare drug benefit, and beneficiaries who qualify for the low-income subsidy.

"Drug plan coverage in the doughnut hole will be much scarcer in 2007, and, in those states where such coverage continues to be available, it will be far more expensive," said Ron Pollack, the executive director of Families USA. "This coverage gap never made sense, and now it is getting worse for seniors who take multiple prescription drugs."

Where comprehensive gap coverage is offered, premiums for the lowest-priced Medicare drug plans will increase by 87.4 percent, from a median monthly price of $55.08 in 2006 to $103.20 in 2007, Families USA researchers conclude.

In a statement, acting Centers for Medicare and Medicaid Services Administrator Leslie V. Norwalk said that "all Medicare beneficiaries in all 50 states have the option of an affordable drug plan" offering some or complete coverage in the gap in 2007.

Norwalk also said that beneficiaries in the majority of states "are seeing no change in the number of plans offering coverage of brand-name drugs in the gap" and that the report does not acknowledge cost savings from the use of lower-cost generics and therapeutic substitutes.

Mohit Ghose, a spokesman for America's Health Insurance Plans, faulted the study for not analyzing the coverage that Medicare Advantage plans provide to beneficiaries. "Any comparison and any study of the Part D program and the ways in which beneficiaries can access drug coverage must include a discussion of all types and all programs available, including Medicare Advantage plans," he said. Medicare Advantage plans cover both prescription drugs and other health services.

House Minority Leader Nancy Pelosi, D-Calif., said the Families USA study "provides new evidence that under the confusing Republican prescription drug bill, the number of seniors at risk of falling into the doughnut hole will skyrocket next year."

Without referencing the consumer group's study by name, Senate Finance Committee Chairman Charles E. Grassley, R-Iowa, issued a statement defending the Medicare drug plan against "partisan attacks in Iowa and elsewhere."

While the program "may not be perfect," Grassley said, "beneficiaries now can get affordable prescription drug coverage and they can choose a plan, including a plan with gap coverage, that best meets their needs."

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