Medicare Update: Into the Doughnut Hole

18 Mar
2010

Medicare Update

The so-called “doughnut hole” in Medicare’s Part D benefit is a difficult concept for many people to understand. The term raises such questions as these: What are the exact out-of-pocket requirements? When and where does this doughnut hole begin and end?

If you think you had the answer, it just changed for the new benefit year 2007 (Tables 1 and 2). Because the out-of-pocket expenses are adjusted annually according to an inflation factor, these expenses increase for each phase of the Part D benefit. canada viagra online

Table 1   Medicare Part D Beneficiary Coverage for 2006

Beneficiary Percentage

Total Prescriptions Received (Range)     Out-of-Pocket Expense
Annual deductible Initial benefit Coverage gap Catastrophic coverage100% 25% 100% 5%$0-$250 $250 $25l-$2,250 $500 $2,25l-$5,l00                                 $2,850> $5,100
Medicare beneficiary out-of-pocket expenses needed to reach catastrophic coverage in 2006 = $3,600.

Given the heightened focus from the Democratic Party’s new leadership to “fill in” the doughnut hole, it is also likely that more changes lie ahead. These changes will probably take the course of one of three approaches:

  • In the middle of the political spectrum—and most likely to be passed—is a plan whereby the Secretary of the Department of Health and Human Services (DHHS) would negotiate prices as a ceiling. These prices would be passed on to the prescription plans. Of course, the question remains: What will these prices be based on?
  • At one end of the spectrum is a plan to simply remove the “non-interference” clause. This clause currently specifies that the DHHS Secretary may not interfere in negotiations between drug manufacturers, pharmacies, and prescription-drug plan sponsors; may not require a particular formulary; and may not institute a price structure for Part D drugs. Simply removing this requirement with the current Secretary is unlikely to result in any changes.
  • At the other end of the spectrum is a plan whereby the federal government would create a national formulary.

Table 2 Medicare Part D Beneficiary Coverage for 2007

Beneficiary Percentage

Total Prescriptions Received (Range)     Out-of-Pocket Expense
Annual deductible Initial benefit Coverage gap Catastrophic coveragel00% 25% l00% 5%

$0-$265                                        $265 $266-$2,400                                 $533.75 $2,40l-$5,45l.25                             $3,051.25 > $5,45l

Medicare beneficiary out-of-pocket expenses needed to reach catastrophic coverage in 2007 = $3,850

Of course, health care providers can take actions to help reduce the impact of the doughnut hole. The first step in providing coverage is to ensure that Medicare beneficiaries don’t enter this gap in coverage unless they truly cannot avoid doing so. Patients may be able to avoid the doughnut hole if the most effective medications—as well as the most efficient ones—are prescribed. The most effective drugs deliver the best results with the fewest side effects. The most efficient drugs are similar enough in their pharmacokinetics but are available at a lower cost (including generic and available combination medications).

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