Donut holes aren’t a tasty treat for seniors

Donuts are such tasty treats, aren’t they? And what about those fun items from Dunkin Donuts called Munchkins – also known as donut holes? Yummy!

But there’s another kind of “donut hole” in our health care system that’s neither tasty nor fun. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, added, among other provisions, a Part D to Medicare. Part D is a voluntary benefit that covers outpatient prescription drugs.

Part D coverage gap. Under Medicare Part D, the standard drug benefit includes a $295 deductible (in 2009) and 25 percent coinsurance until the enrollee reaches the initial coverage limit ($2,700 in total covered drug spending). After the initial coverage limit, there is a gap in coverage (that’s the donut hole) in which the beneficiary is responsible for 100 percent of drug costs. Beneficiaries must spend $3,454.75 out of pocket before they reach the catastrophic benefit. Once they reach the catastrophic coverage limit ($6,153), they are responsible for 5 percent of drug costs.

In 2007, over 8 million seniors hit the donut hole, according to a press release from the Department of Health and Human Services (HHS). For those who are not low-income or have not purchased other coverage, average drug costs in this coverage gap are $340 per month, or $4,080 per year, according to HHS.

Closing the gap. The Senate Finance Committee’s bill would close this coverage gap over time. While the closure of the coverage gap is phased in, this proposal would provide seniors with a discount of 50 percent on their brand name medication costs in the coverage gap, according to HHS.

The proposal would “provide for manufacturer discounts on brand-name drugs that are covered under Part D and are on plan formularies or treated as being on plan formularies through exceptions and appeals processes. The discount would be available during the entire coverage gap—that is, at the point when total prescription costs of a beneficiary exceeds the initial coverage limit ($2,700 in 2009) and reaches the catastrophic coverage limit ($6,153 in 2009) each year. Once the prescription costs of a beneficiary exceed the catastrophic limit, the discount would end and the catastrophic portion of the drug benefit would apply as under current law,” according to the bill.