Insurer Scales Back, Widening Medicare Prescription Gap

Seniors wanting to avoid the Medicare prescription program's coverage gap have had one clear alternative: Choose a plan that cost more but bridged the break in benefits. 

But that option will be more restricted and more expensive next year. The leading national plan that covers brand and generic drugs in the gap — Humana PDP Complete — will no longer pay for brand-name prescriptions.

More than 410,000 seniors in the plan will face higher premiums and only be covered for generics in the coverage gap. Or, they can shop for another insurer. In some states, no plan will be available next year that covers brand-name medications in the gap.

Louisville-based Humana's decision to scale back its coverage raises a new complication for Democrats vowing to reform the prescription program, experts say. The party, which will take control of Congress in January, has focused on authorizing Medicare to negotiate lower prices with drug makers. 

Humana's decision shows that the actions of insurers — the private middlemen who deliver the benefit — also can have a profound effect on seniors' pocketbooks. Negotiations with drug manufacturers may or may not resolve such problems.

"When an insurance company has a plan design that it cannot make money on, it can be pretty ruthless in what it does to correct that," said Robert Laszewski, a healthcare industry consultant. Humana said recently it had paid out $1.33 in benefits for every $1 it took in this year under the PDP Complete plan.

Generic drugs, usually copies of brand-name drugs on which the patents have expired, cost a lot less. But no generics are available for relatively new drugs, including many medicines for conditions ranging from cancer to psychiatric problems.

Moe Tawil, 70, a retired engineer from Manhattan Beach, says he can understand why the insurer would need to raise premiums, but he questions the decision to curtail coverage of brand-name drugs. 

"The fact that the plan can significantly change is at best annoying, and at worst it can create quite a problem for some people," he said. "It just causes a tremendous amount of confusion and heartache. You don't buy auto insurance to have them tell you, 'By the way, we're not going to cover collision next year.'" 

Tawil's wife, Barbara, is on Femara, a pill taken daily to prevent the recurrence of breast cancer. Considered more effective than tamoxifen, the medication costs more than $700 for a 90-day supply. The Tawils now pay $150 through her PDP Complete plan. There is no generic equivalent for Femara, which is manufactured by Novartis.

"I went through a lot this year to find this plan, and I certainly don't want a plan that won't cover one of my medications," Barbara Tawil said. "I would like some consistency in coverage for next year."

Although the Medicare prescription program has proved popular among seniors, the coverage gap known as the doughnut hole remains a challenge. Congress designed the break in benefits to cut program costs, and then indexed the gap for inflation.

That means the doughnut hole will widen next year, to just over $3,050 from the current $2,850. When a beneficiary reaches $2,400 in total drugs costs, no coverage is provided until the person reaches $5,451.25 in costs. After that, Medicare pays 95%. 

Although more plans will offer coverage of generic drugs in the gap next year, the number covering brand-name medications will drop from 33 to 27. Fewer than one-third of Medicare prescription plans offer any sort of coverage in the gap, according to a recent study for the Kaiser Family Foundation.

Some advocates for seniors say insurers have engaged in misleading marketing.

"This illustrates the exploitative marketplace older Americans are facing," said Robert M. Hayes, president of the Medicare Rights Center, a New York advocacy group. "The marketing strategy was premised on bait-and-switch, aggressive marketing and low premiums in Year One to bring the customer in, and then reduced benefits and increased costs."

Humana rejects that charge.

"After reviewing the 2006 experience with our complete plan that covered brand drugs through the coverage gap, it became clear to us that we could not continue to do that in 2007 and be able to offer it at an affordable premium," spokesman Dick Brown said. 

"When we bid for the 2006 plans," Brown said, "we assumed other companies would do as we did and offer one plan that covered brand drugs through the gap. That did not happen. We under-priced the plan based on that erroneous assumption. In short, our scenario just did not play out as we assumed."

A Medicare official declined to comment. The agency has been stressing the growing availability of coverage for generics in the gap. 

Seniors who want to switch from Humana's PDP Complete plan have until Dec. 31 to do so, although Medicare is recommending they act by Dec. 8 to avoid possible problems at the pharmacy in January.

However, Medicare may have inadvertently added to the confusion by telling seniors they don't have to switch if they are satisfied with their current plan, Hayes said. "Many people will just sit still," he added.

Although Democrats have not directly addressed the issue of disruptions in coverage, one of the plans they are discussing might offer a remedy. 

Sen. Richard J. Durbin (D-Ill.) and Rep. Pete Stark (D-Fremont) have called for Medicare to set up a government-administered prescription plan to compete with the private ones. Such a government plan would not have to make a profit, and could be set up to provide stable coverage from year to year.

"If done properly, it could offer a safe haven," Hayes said.