Gap in Medicare Rx Coverage Is Costly
Watchdog Group Warns Insurance Costs Are Rising to Fill a Hole in Medicare Rx Coverage
Nov. 1, 2006 -- The cost of insurance protection against Medicare's "doughnut hole" coverage gap for prescription drugs is set to increase substantially next year, a report from a consumer watchdog group concluded Wednesday.
The report also found private insurance companies in 13 states do not offer plans with what it deems "meaningful" gap benefits, because plans covering only generic drugs leave out many brand-name medications widely used by seniors. That could leave seniors to go without the price protection or join a managed care plan to obtain the coverage, the report says.
The 13 states include Florida, New York, and Michigan.
What's a 'Doughnut Hole'?
The so-called "doughnut hole" refers to a gap in Medicare prescription coverage when beneficiaries' drug costs fall between certain levels. In 2006, Part D covered 75% of most seniors' drug costs up to $2,250 on top of their monthly premiums. Coverage then stops completely until costs reach $5,100 in a calendar year, after which the plan pays 95% of all drug costs.
"Drug plan coverage in the doughnut hole will be much scarcer in 2007 than in 2006, and in those states where such coverage continues to be available it will be far more expensive," says Ron Pollack, executive director of Families USA, the group releasing the report.
The time for Medicare Part D beneficiaries to enroll or switch drug plans for 2007 starts Nov. 15. Insurance companies in most states offer plans allowing seniors to pay higher premiums in exchange for coverage of a wider range of drugs or coverage in Part D's doughnut hole.
Figures on how many Medicare beneficiaries will confront Part D's spending limits this year are not expected until early 2007. Estimates range from 3 million to 6 million.
The 13 states on the group's list are not completely without plans offering gap coverage. Most, including Florida, still have a handful of plans offering more comprehensive coverage of generics. But Pollack stressed that 18 of the 25 most popular drugs used by seniors have no generic equivalent.
The report also warns that premiums will go up a median of 87% next year for full drug coverage up to the $5,100 limit. Seven Midwestern states, including Iowa, Nebraska, and the Dakotas, will see premium increases of 185% for the plans, it concludes.
Shrinking doughnut hole coverage comes as the gap begins a scheduled expansion next year mandated by law. The $2,850 overall coverage gap in 2006 is set to grow to $3,051 next year.
Pollack said the plans are likely growing more expensive because they are attracting seniors with higher drug costs.
"The people who are sickest, the people who need the most medicines, are the most likely to opt into these kinds of plans, and of course that means that the cost of those plans grows rather significantly," he told reporters.