Ask Medicare beneficiaries what they hate most about Part D prescription drug coverage and a chorus goes up: “The doughnut hole!” Although most enrollees have saved money buying their drugs through Part D since the program began in 2006, the thing they fear most is falling into that gap in coverage—universally nicknamed the doughnut hole—where they must generally pay 100 percent of the cost of medicines out of their own pockets.
Now, with a mood in Washington to make health care more affordable for everyone, AARP and some other consumer groups are calling on Congress to eliminate the Part D gap, or at least narrow it.
“Medicare beneficiaries dread falling into the doughnut hole because it essentially leaves them uninsured for a major medical expense for part of the year,” says Cheryl Matheis, AARP’s director of health strategies. “To millions of people enrolled in Part D, making health care more affordable means closing the coverage gap.”
The Medicare drug benefit is unlike any other type of insurance. Health policy experts compare it to a roller coaster. In any given year, depending on the total cost of the drugs they consume and the design of their Part D drug plan, enrollees can move through a number of periods of coverage and noncoverage, as follows:
- Enrollee pays up to $295 out of pocket at the beginning of the year until coverage kicks in—though some drug plans charge no deductible
Coverage—Initial coverage phase
- Enrollee pays copayments or coinsurance required by plan until total drug costs (what both enrollee and plan have paid) reach $2,700 since the beginning of the year
Noncoverage—Doughnut hole phase
- Enrollee pays 100 percent of drug costs until $4,350 has been paid out of pocket on drugs (excluding premiums) since the beginning of the year
- Enrollee pays up to 5 percent of drug costs until the end of the year
Another Part D coverage analogy: It’s a bit like having auto insurance that stops after policyholders have traveled a certain number of miles in a year—but kicks in again if their mileage reaches a very high level before the end of the year.
For example, Latricia Solberg of Rialto, Calif., a kidney patient who has dialysis three times a week, needs to take 12 Renagel pills a day to keep her phosphorous levels in check. Under Part D, her copay was $90 for three months’ supply. Now, in the doughnut hole, it costs $2,019 for the same quantity.
No cheaper generic version of Renagel is available in the United States, and Solberg doesn’t expect to qualify for catastrophic coverage before November. The cost takes precious money she and her husband need for other things—“and with both of us on disability, that’s scary,” she says. “But if I stopped taking it, I’d get really sick.” She will face this dilemma each year.
About one in four Part D enrollees (26 percent) fell into the coverage gap in 2007, according to a study published by the Kaiser Family Foundation last year. Among those age 85 and older, this figure rose to one in three. Half of enrollees who got dunked in the doughnut hole reached it by August, and most stayed in it for the rest of the year. Only 4 percent of enrollees made it through the gap to reach the benevolent phase of catastrophic coverage, in which they pay no more than 5 percent of the cost of their drugs until the end of the year.
What happens when beneficiaries hit the gap? Some do what they did before Part D began—they ask doctors for free samples, apply to the drug manufacturers or low-cost community clinics for assistance, skip doses, or just fail to fill prescriptions. And some switch from expensive brand-name drugs to lower-cost generics—a strategy that an increasing number of beneficiaries use to postpone the gap or avoid it entirely. But this isn’t an option for people using the newest brand-name or biologic drugs that don’t have generic alternatives.
“We hear all the time from people about the hardship the doughnut hole causes, because very often they can’t afford their drugs,” says Paul Precht, director of policy and communications at the Medicare Rights Center, a consumer advocacy group based in New York. “So people with chronic conditions have trouble maintaining their drug regimens, which is serious because it can lead to complications and make them sicker and more expensive to take care of in the long run.”
On average, beneficiaries who fall into the gap cut back on their prescriptions by about 14 percent a month, according to a study by researchers from the University of Pittsburgh and Harvard University that was published in Health Affairs in February. “One can assume not only that the lack of coverage in the doughnut hole had adverse health consequences,” the authors noted, “but also that it could have increased costs for hospital and physician services.”