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.
In a statement, a spokesman for the Centers for Medicaid Services says the Families USA report "presents a distorted and incomplete picture of the array of plans offering beneficiaries meaningful assistance with high drug costs in 2007.and
"All beneficiaries in all 50 States have the option of an affordable drug plan that offers at least some or complete coverage in the gap in 2007," spokesman Aaron Hase says in the statement.
In addition, "Those in the majority of States are seeing no change in the number of plans offering coverage of brand-name drugs in the gap."
View From Capitol Hill
Democrats have vowed to push bills altering Medicare's structure and pricing arrangements if they take control of one or both houses of Congress in the midterm elections Nov. 7. Republicans point to polls showing that the vast majority of seniors who enrolled in Part D this year are satisfied with their coverage.
In a statement, House Democratic Leader Nancy Pelosi, D-Calif., says the report is evidence that the number of Medicare beneficiaries "will skyrocket next year, denying millions more seniors access to their prescription drugs."
Sen. Charles Grassley, R-Iowa, chairman of the committee governing Medicare, pegs the report as "election year politics" by groups opposed to Medicare's Part D plan.
"The bottom line is this. Tens of thousands of Iowans can now afford their prescription medicines," Grassley says in a statement.