Examining Medicare Drug Benefit's Doughnut Hole Coverage Gap

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Medicare Drug Benefit

The New York Timeson Saturday published two articles examining the so-called "doughnuthole" coverage gap of the Medicare prescription drug benefit. In 2008, thecoverage gap will take effect when beneficiaries' total drug costs reach$2,510. Beneficiaries then will be responsible for paying 100% of drug costsuntil total costs reach $5,726, when catastrophic coverage kicks in. Summariesof the articles appear below.

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  • Gap coverage: Medicare beneficiaries can purchase drug plans that include doughnut hole coverage, but in some cases, the higher premiums for such plans might not be worth the cost to seniors, according to the Times. Twenty-nine percent of Medicare drug plans now offer coverage during the doughnut hole, compared with 15% of plans in 2006, according to data from the Kaiser Family Foundation. Such plans typically cost about twice as much as the $28 average premium for plans without doughnut hole coverage, and most provide coverage only for generic drugs. According to the Times, the least-expensive approach "in the short run" for beneficiaries who are able to "rely solely on generic drugs" might be to forgo enrolling in a Medicare drug plan altogether and instead purchase drugs at discount stores -- such as Wal-Mart, Costco and Target -- that offer generic drugs for as little as $4 per prescription (Saul [1], New York Times, 11/24).

  • Generic drugs: Some experts "see a positive public policy trend" in the doughnut hole because it is helping to steer beneficiaries toward lower-cost generic drugs to avoid paying more than $3,000 in out-of-pocket costs, the Times reports. In addition, according to Tim Anderson, a physician and pharmaceuticals analyst for Sanford C. Bernstein, because lower-cost generics generally work as well as brand-name drugs, more beneficiaries are incorporating them into their permanent drug regimens. A Wolters Kluwer study found that 4.2 million beneficiaries reached the doughnut hole last year, and many of them switched to generic drugs to keep out-of-pocket costs low. According to Medicare data, an estimated 59.6% of Medicare drug benefit prescriptions in 2006 were filled with generic drugs, and by the first quarter of 2007, 61.5% of Part D prescriptions were filled with generic drugs. Acting CMS Administrator Kerry Weems said the drug benefit has made consumers more price-conscious overall by allowing them to use the Medicare Web site to compare costs of treatments (Saul [2], New York Times, 11/24).

Reprintedwith permission from kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign upfor email delivery at kaisernetwork.org/email . The Kaiser Daily Health PolicyReport is published for kaisernetwork.org, a free service of The Henry J.Kaiser Family Foundation.

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