‘Donut Hole’ Takes Bite Out of Medicare Recipients

by James Parks, Jun 9, 2006

For starters, retiree Edward Eisenhower and his wife will have to cut back on Christmas presents this year for their five children and 12 grandchildren because they will have to spend a lot more on the six prescription drugs he needs to take daily. Eisenhower, 70, a former production-control supervisor at Bethlehem Steel and Alcoa, will hit the Medicare “donut hole” sometime between next month and the early fall.

“We make enough to live comfortably, but we’ll have to cut back on a lot of things,” he says. “I can’t pay for the prescriptions and keep living the way I’ve been living.”

Under the new Medicare Part D rules passed by Congress in 2003, out-of-pocket prescription expenses between the annual amounts of $2,251 and $5,100 are not covered. This gap has been dubbed the “donut hole.” Of the 11.8 million Medicare enrollees whose plans include a coverage gap, the Kaiser Family Foundation estimates that 6.9 million of them could hit the donut hole. A staff researcher says the real number may be higher.

Eisenhower says he needs prescription drugs for allergies, high blood pressure, diabetes, an enlarged prostate and uric acid. It costs more than $1,600 for a three-month, mail-order supply.

“It’s going to hit hard,” says Eisenhower, who receives Social Security and a small pension from his days at Beth Steel. His company pension was reduced 36 percent because he retired early after the plant where he worked shut down 20 years ago.

Eisenhower, who lives in Annville, Pa., about 25 miles east of Harrisburg, doesn’t have the security of union-negotiated health care. For the first 10 years of his 30 years at Beth Steel, he was a member of the Steelworkers. Then he moved into management. When he retired from Alcoa, the company had just bought the plant where he worked and did not extend the company retiree health care plan to new employees.

Seniors on Medicare are in this bind because the Bush administration insisted on protecting the profits of pharmaceutical companies rather than reducing costs for consumers, according to the Alliance for Retired Americans. The Bush Medicare plan does not allow the government to negotiate lower costs with drug companies—as other federal agencies, hundreds of corporations and several states do.

“The longer we go without allowing Medicare to negotiate prices with the drug companies, the worse the situation gets,” says Ruben Burks, secretary-treasurer of the alliance.

As Eisenhower sees it: “I don’t understand the logic of the donut hole. It seems to me the whole approach to this Medicare prescription drug coverage is tilted. I felt from the beginning that we took care of the pharmaceutical companies. We took care of the insurance companies. And we gave a little something to the retirees.”

Because the overwhelming majority of the Medicare Part D plans include a donut hole, experts say it’s a safe bet that millions of seniors on fixed incomes, especially those with chronic illnesses and with disabilities, will be struggling to pay for the life-sustaining medications they need but can’t afford without coverage.

Under Part D, a “standard” drug plan pays 75 percent of initial drug costs up to $2,250 after a $250 deductible for most seniors. But then the program pays nothing until drug expenses reach $5,100, after which the government pays 95 percent of all costs.

This structure means that sicker patients with higher drug costs will end up not only paying more for their drugs but also paying a higher share of their costs than those with fewer prescriptions, says Marilyn Moon, director of health programs at the American Institutes for Research, who authored a 2004 report on Medicare for the Commonwealth Fund.

A senior with $1,000 in annual drug costs would pay $438 out of pocket under the plan, while a beneficiary with $5,000 in costs would be responsible for $3,500 of his or her total costs, according to Moon’s report.

And it’s going to get worse. BNA’s Health Care Policy Report says the Centers for Medicare and Medicaid Services (CMS) have updated the standard Part D benefit for 2007, increasing deductibles, out-of-pocket maximums and other costs for seniors by 6.8 percent. Beginning Jan. 1, the deductible for the standard benefit will increase from $250 to $265. In addition, seniors will have to spend $3,850 out of pocket before having 95 percent of their drug costs covered, instead of the $3,000 they have to spend in 2006.

The donut hole also will grow. In 2006, that gap is between $2,250 and $5,100, but in 2007 it will be between $2,400 and $5,451.

In a just-released video, “The Problems with the Medicare Drug Program—and How to Fix Them” from Families USA, narrator Walter Cronkite addresses the complexity, confusion and expense of the program. Glaring gaps such as the “donut hole” and failure to contain skyrocketing costs are examined.

The short film is forward-looking, with Cronkite and Part D experts recommending crucial improvements to the benefit.  The veteran journalist offers some key prescriptions: Allow Medicare to bargain for lower drug prices and close the wide gap in coverage.

The 14-minute video is available through the Families USA website. Click here to request DVD or VHS copies.

		Become a Fan on Facebook			Follow Us on Twitter			Subscribe to YouTube			Subscribe to Blog RSS

Print This Article | E-Mail This Article |Comments (0)