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Filling in the Medicare Doughnut Hole is a Sticky Issue
By Bob Moos, Dallas News
June 10, 2009
AARP and other advocates for older adults are calling on Congress to get rid of the "doughnut hole" in Medicare's drug benefit as part of the lawmakers' broader efforts to reform health care.
John and Donna Williams of Colleyville say their out-of-pocket drug expenses quadruple to more than $400 a month once they hit the doughnut hole, when Medicare's and their costs together exceed $2,700 for prescriptions in a year.
Though most seniors say they're pleased with the drug benefit, the one aspect they love to hate is the gap in coverage that usually kicks in during summer or fall and forces millions of beneficiaries to bear the full cost of their drugs.
"The doughnut hole is one of our members' top concerns about Medicare," said David Certner, legislative policy director for AARP. "So we've begun to work with key members of Congress to see how to eliminate it or at least shrink it."
The main challenge will be finding the money, he said. Closing the gap and providing continuous coverage for all beneficiaries would cost $134 billion over 10 years, according to the Congressional Budget Office.
But experts say that as much as $110 billion could be raised by requiring drug manufacturers to give Medicare the same 15 percent discount they now give Medicaid, the health insurance program for low-income Americans.
John and Donna Williams of Colleyville say that filling in the doughnut hole would save them thousands of dollars a year.
The couple have reached the coverage gap the last several years and expect to fall into it again this year.
Each time, their out-of-pocket drug expenses jump from less than $100 a month to more than $400.
This year, the telecommunications engineer and his wife, both 71, will dig deeper into their already depleted savings to pay their drug bills while in the doughnut hole.
Williams lost his steady paycheck when the company he worked for was sold late last year. He's now a consultant.
"I'm on 12 prescriptions, and my wife's on nine, so we can't run the risk of doing without our medication," Williams said. "But it's getting harder to pay for everything – we've already cut out our trips to see our children out of state."
More than 3 million of the nearly 27 million older or disabled Americans who receive the Medicare drug benefit are expected to reach the coverage gap this year and pay the full cost of their prescriptions, says the AARP Public Policy Institute.
Beneficiaries hit the doughnut hole once their total drug expenses – both Medicare's costs and their out-of-pocket costs – exceed $2,700.
Unless they qualify for a government subsidy or have bought extra insurance, they're on their own for the next $3,454 in prescriptions.
At that point, after paying a total of $4,350 out of pocket, beneficiaries become eligible for Medicare's catastrophic coverage and are responsible for 5 percent of their bills for the rest of the year. The process repeats itself each Jan. 1.
Because the government updates the doughnut hole annually to reflect growth in drug spending, the AARP Public Policy Institute projects that the size of the gap will almost double, from $3,454 to more than $6,000, by 2016.
Working around gap
Now that the Medicare drug benefit is 4 years old, many seniors have learned how to hold down their prescription costs to avoid or at least delay falling into the coverage gap, said Terry Warner, president of TexMeds Inc. in Richardson.
"They've become more aggressive about asking their doctors about generic equivalents that cost as little as $4 per prescription," he said.
But for beneficiaries who have chronic or serious illnesses and eventually reach the doughnut hole, the sudden increase in out-of-pocket drug costs can pose a severe hardship, said Ed Reece, president of the Eceer Healthcare Advocacy Group in Dallas.
Some seniors are on expensive brand-name drugs that don't have generic equivalents.
"I see people splitting pills or skipping days to make prescriptions last longer," he said. "Both carry risks."
Sixteen percent of beneficiaries who hit the gap reduce their medication or stop taking their drugs altogether, says the Kaiser Family Foundation.
"That should be a serious concern," said Juliette Cubanski, an analyst on the foundation's Medicare policy project. "People who go off their medication sometimes find themselves back in the hospital before long."
The coverage gap exists because Congress had only so much to spend when it created Medicare's prescription drug benefit, Cubanski said.
"The lawmakers couldn't give comprehensive coverage to everyone and stay within their budget, so they provided some initial coverage to all beneficiaries and more help to those with low incomes or high medical costs," she said.
Eliminating the doughnut hole would probably reap savings for Medicare over the long run, since it would keep seniors on their prescriptions and out of the hospital, said Vicki Gottlich, a senior policy attorney for the Center for
Medicare Advocacy.
Narrowing the hole
But even if Congress decides that completely closing the gap would be too expensive an undertaking during this year's health care debate, lawmakers could agree at least to narrow it so that fewer people hit it, she said.
One way to shrink the doughnut hole would be to allow more Medicare drug beneficiaries to qualify for the government's low-income subsidy, said Paul Precht, director of policy and communications for the Medicare Rights Center.
About 10 million Medicare beneficiaries with limited incomes and assets now receive extra help that pays almost all of their out-of-pocket drug costs. The subsidy essentially exempts them from the coverage gap.
"If the government can't afford to eliminate the doughnut hole this year, it should consider raising the income and assets limits for the subsidy so that beneficiaries on moderate incomes can catch a break, too," Precht said.
Other advocates have suggested mandating the coverage of generic drugs through the gap and offsetting the added expense to the government by charging larger co-payments before consumers reach the doughnut hole.
Beneficiaries now pay about 25 percent of the first $2,700 of their annual drug costs.
Under such a proposal, they would pay 30 percent or 35 percent.
"Too many seniors have gotten dunked by the doughnut hole," AARP's Certner said. "It's time to give them some relief."
SHRINK THE DOUGHNUT HOLE
How to cut your out-of-pocket costs in the doughnut hole:
•Ask your doctor if you can switch to generic, over-the-counter or other lower-cost drugs that would work as well.
•Look into drug makers' assistance programs. Go to Medicare's Web site, www.medicare.gov, and click on "Lower Your Costs During the Coverage Gap" to see if your drugs are included in any of the programs and how to apply.
•Ask your doctor for free samples.
•Apply for extra help. If you have a limited income and resources, you may qualify for a government subsidy to reduce your out-of-pocket drug expenses. Check with Social Security by visiting www.socialsecurity.gov or calling 1-800-772-1213.
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