As the third year of Medicare prescription drug coverage approaches, changes in costs and benefits for 2008 again mean that beneficiaries will need to compare drug plans to get the best deal and, if appropriate, switch to another plan before open enrollment ends on Dec. 31.
Many Part D plans will raise premiums and copayments, especially for brand-name drugs, next year. But some will lower their charges and/or expand their lists of covered drugs.
Of concern for 2008, however, is the outlook for beneficiaries with moderate to high drug costs who are likely to fall into the gap in coverage known as the doughnut hole. They must pay 100 percent of their costs in the gap, unless they have additional benefits (such as Medicare's Extra Help program for limited-income people, which has no gap). About 3 million beneficiaries are expected to hit the gap in 2007, according to the Kaiser Family Foundation. An AARP Bulletin analysis of their options for 2008 has found that:
• Most beneficiaries will have no access to coverage for brand-name drugs in the gap.
• More plans will cover generics in the gap but often with a narrow range of drugs.
• Some plans will charge higher copays for generics in the gap than for the same drugs during the initial coverage period.
Looking deeper into these options, the Bulletin analysis found examples of plans with changes that may not be obvious at first glance. In 2008, for example, the plans describe drug coverage in the gap in less specific terms—such as "some generics, some brands," or "preferred generics"—than they did in the past.
Brand coverage in the gap
In a dramatic change, coverage for brand-name drugs in the doughnut hole will all but vanish on Jan. 1 among the “stand-alone” prescription drug plans (PDPs) in which most Medicare beneficiaries are enrolled. In 2008 only one PDP in one state will give any brand coverage in the gap.
“This is bad news for many people taking brand-name drugs for which no generics are available,” says Vicki Gottlich of the Center for Medicare Advocacy in Washington.
Certainly, without coverage in the gap, beneficiaries with high drug costs would more quickly reach the catastrophic level of coverage on the other side. But they will have to spend $4,050 out of pocket (not including premiums) in 2008 to get to that point.
By law, no plans are required to provide coverage in the doughnut hole, which Congress devised to hold down the costs of the program. But when Part D began, in a surge to carve out market share, some plans did offer this enhanced benefit.
In 2006 brand coverage in the gap was offered in 46 states, mainly by the Humana insurance company. But Humana eliminated the coverage at the end of the year, saying it wasn’t sustainable. In 2007 similar plans were available in 39 states, mainly offered by SierraRx, which ran into financial trouble by early spring. Inevitably, such plans attract enrollees who use the most expensive drugs and therefore cost the plans more.
In 2008 one new stand-alone plan is venturing into the field. Citrus Health Care will provide gap coverage only in Florida and only for generics and about 30 brand names. These are mostly drugs for chronic conditions like diabetes, asthma and heart risks, the plan’s pharmacy coordinator says.
The outlook is somewhat better among Medicare Advantage plans that cover both health care and drugs, at least for beneficiaries living in the few areas where plans offer brand coverage in the gap. Overall, 12 states have such plans (down from 22 last year), mostly focused in large urban areas. Of California’s 58 counties, for example, they’re available in just three, all in the Los Angeles area.
In 32 states, including California, Humana’s private fee-for-service MA plans offer “some generics and some brands” in the gap. But all of these, a total of about 50 drugs, are short-term injectable medicines (mainly antibiotics and blood thinners) typically used to shorten a patient’s hospital stay. For a plan that covers high hospital costs, it makes sense “to get the beneficiary to a place that’s comfortable for them [home] and most cost-effective for us,” says Betsy Warren, Humana’s director of Medicare pharmacy services.
Thirty-three Medicare HMOs and PPOs in one or two counties in each of nine states offer complete coverage through the gap for all drugs on their formulary. A few others, scattered around the nation in select counties, offer “all preferred brands” or “some brands” in the gap.
Generic coverage in the gap
Fewer people may be affected by the gap next year if they’re able to switch to generics or lower-cost brand names that are effective for their medical condition. That could stretch their dollars in the initial coverage period and might keep them out of the gap altogether.
Copays for generics are much lower than for brands—ranging from zero to $12 per prescription in 2008 among the top 12 stand-alone drug plans with the most enrollments, according to the research group Avalere Health. And at least 14 plans in each state will cover generics in the doughnut hole, though their coverage varies from “all generics” through “preferred generics” to “some generics.”
There’s a paradox here. People who take only generic drugs may assume that a plan that covers generics in the gap is best for them. But not necessarily: Their total drug cost may be low enough to keep them out of the gap.
For example, the Bulletin analysis used a set of nine common generic drugs to compare stand-alone plans in Florida. Even in the most expensive plan, the full price for all these drugs (ranging from $2.26 to $53.32 a month) amounts to $1,466 over the year—well short of the $2,510 limit on initial coverage that triggers the start of the gap in 2008.
Of Florida’s 58 stand-alone plans, 13 offer generic coverage of varying kinds in the gap next year, with premiums from $30 to $91 a month. Yet with our set of nine generics, even the lowest-cost fill-in-the-gap plan, which charges nothing for generics in or out of the gap, does not work out as the least expensive plan overall. Nine plans with no coverage in the gap cost less out of pocket over the year.
Another little-known factor to watch out for: Some plans will shift more costs to beneficiaries by charging higher copays for generics in the gap. For example, one of the Florida fill-in plans charges more than seven times as much for the same drugs in the gap ($15) as it does in the initial coverage period ($2). Another plan charges a $20 copay instead of the usual $5, and a third plan $12 instead of $4.
Of course, a different set of prescription drugs would bring different results. But our analysis shows that beneficiaries should be aware that a plan covering generics in the gap won’t necessarily lower their costs. To find out, they need to do a careful plan comparison according to the drugs they take.
Patricia Barry is a senior editor at AARP Bulletin Today.