House Democrats to Issue Report on Medicare Coverage Gaps

WASHINGTON – Most seniors and the disabled selected Medicare drug plans with a significant gap in coverage and Democratic lawmakers say that's because bridging it would have cost them, on average, nearly $40 a month more.

Contending that's far too much money, Democrats on the House Ways and Means Committee were issuing a report Thursday estimating that 88 percent of the Medicare beneficiaries with stand-alone coverage opted for plans with a coverage gap.

Scores of people upset about the gap, nicknamed the "doughnut hole," have called Rep. Debbie Wasserman Schultz. The Florida Democrat recalled during a news conference Wednesday the experience of one constituent.

"She takes Nexium for her acid reflux, and the short-term solution for her is that she had to ask her siblings for handouts," Wasserman Schultz said. "That's the reality of one individual's life who fell into the doughnut hole."

Under the standard Medicare plan, the government subsidizes the drug costs for seniors and the disabled. But after costs reach $2,250, the subsidy stops until a beneficiary has paid out $3,600 of his or her own money. Then, the government will start picking up 95 percent of each purchase.

The gap that opens when the subsidy stops and closes when the subsidy resumes is the "doughnut hole" -- the point where a consumer picks up the entire cost of his or her medicine while still continuing to pay monthly premiums. Those who choose a plan that fills the doughnut hole can do so -- but at the cost in higher insurance premiums.

Beneficiaries qualifying for a low-income subsidy are not included in the Democrats' estimate of those facing hardship, nor are those who enrolled in Medicare Advantages programs, which work like an HMO.

The analysis includes a breakdown by state showing how much more money residents would have to pay annually if they switched to a plan that had no doughnut hole. The nationwide average was $458. Residents of New Jersey would have to pay, on average, an additional $298. Residents of seven states would have to pay, on average, an additional $721. Those states are Iowa, Minnesota, Montana, North Dakota, Nebraska, South Dakota and Wyoming.

"As this report shows, the opportunity to purchase plans that fill the hole is a mirage," said Rep. Pete Stark, D-Calif. "Beneficiaries are no more able to afford expensive, full-coverage plans than minimum wage Americans are able to afford a Mercedes."

Still, the government estimates that the average participant in a drug plan will save $1,100 on their medicine this year. Supporters of the program note that surveys of beneficiaries indicate that a large majority are happy with their drug coverage.

Jeff Nelligan, a spokesman for the Centers for Medicare and Medicaid Services, notes that the poorest of seniors don't have to worry about a gap in coverage. For those with somewhat limited incomes, 21 states offer assistance programs that help pay for their medicine. Also, most of the major drug makers provide free medicine to many low-income seniors.

Add it all and only a small percentage of Medicare beneficiaries will be responsible for expenditures within the doughnut hole, Nelligan said.

The Democrats on the Ways and Means Committee avoided estimating how many seniors and the disabled will hit the doughnut hole this year. Federal officials have also hesitated to make such an estimate, but CMS Administrator Mark McClellan has cited a potential range of 3.4 million to 6.9 million, which is based on estimates from outside organizations.

Democrats contend that one solution to filling the doughnut hole would be to let the government negotiate drug prices on behalf of beneficiaries, instead of having fragmented insurance companies doing that. Then, the government could use the savings achieved to do away with the gap.

But Nelligan replied that all of the Democratic proposals that have been scored by the Congressional Budget Office had cost projections at least twice as high as the cost of the current drug benefit.