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Study finds wide coverage gap in new Medicare drug plan
Scripps Howard News Service


July 12, 2005

WASHINGTON - Medicare's new drug benefit will cover less than half the annual bills for patients who have high or catastrophic prescription expenses during the program's first three years, according to an analysis published Tuesday.

In the first study of its kind, researchers estimate that the average Medicare patient who spends more than $2,250 on prescriptions next year will accumulate nearly $11,000 in out-of-pocket costs between 2006 and 2008. A patient who spends more than $5,100 a year on drugs next year would face out-of-pocket costs of $12,300 during the same period.

In the most extensive look at the coverage gap in the new Medicare drug plan, researchers estimate that in the first year of the program, about 38 percent of enrollees will be faced with paying out-of-pocket for their drugs until they reach the catastrophic threshold of $5,100, when coverage kicks back in.

Because of the way the new Medicare program is structured, averaged over three years, patients who have high drug expenses will pay about 67 percent of their drug costs out-of-pocket; catastrophic spenders will pay about 51 percent, says the study in the journal Health Affairs.

"Some people are really going to be disadvantaged," said Bruce Stuart, director of the Peter Lamy Center on Drug Therapy and Aging at the University of Maryland-Baltimore, and lead author of the report.

"Patterns of spending for drugs are much more persistent than spending for other types of medical care," Stuart explained, "so people who are high spenders in one year are high spenders in the next year. Because of the way the (Medicare) Part D benefit is structured, it puts them at a consistent disadvantage over low spenders year after year."

Stuart and colleagues from several other institutions looked at how the program might work for Medicare beneficiaries who sign up for the drug coverage, but have incomes too high to be eligible for subsidies.

Starting next January, those patients will have to pay the full cost of their drugs until they meet a $250 deductible, then see 75 percent of their costs covered up to $2,250. After that, they're in the so-called "donut hole" of the plan, entirely responsible for the next $2,850 they spend on medications, until they hit the $5,100 catastrophic threshold, when they pay only 5 percent of drug costs for the rest of the year.

Moreover, the deductible level goes up $25 each year and the coverage gap rises by 9 percent to 10 percent each year until it will reach $5,066 in 2013. And because the new Medicare law forbids the sale of private Medigap insurance policies that cover the gap for drugs, patients will have to pay the difference themselves.

Stuart and colleagues worked with those figures and projected drug spending patterns forward using a survey of 12,000 Medicare patients in 2000 and annual reports on health spending patterns in the United States.

Although Medicare patients, like most Americans, will have peaks and valleys in their use of prescription drugs, other studies have shown that at least 60 percent of the medications taken by people over 65 are used continuously to manage chronic conditions.

They estimate that 38 percent of the enrollees will hit the no-coverage zone during the first year and that 14 percent will exceed the catastrophic threshold of $5,100 in the first year.

Translating this to the time that Medicare patients will be on their own for large drug bills each year, the researchers said a patient spending $5,000 a year in 2006 will lack coverage for 7.2 months; by 2008, a patient with the same annual bill would go 6.2 months without coverage.

But a patient spending $10,000 a year on drugs in 2006 would be in the donut hole 3.7 months next year, rising to 4.5 months by 2008.

On the other hand, the researchers point out that the drug plan will be a big improvement for an estimated 9 million low-income patients who will get extra help with drug bills, and for people who have relatively constant spending of a few thousand dollars each year.

But given the likely impact on so many people facing high costs, the researchers suggest that Congress consider replacing the catastrophic threshold with a cap on the proportion of a patient's household income paid for drugs or perhaps repeal the ban on supplemental coverage for drug costs.

In the interim, they also suggest that more effort go into educating patients that, depending on how their drug spending goes, there may be big fluctuations in their out-of-pocket drug costs over the course of each year and that they need to try and set up their budgets to accommodate what they term "riding the benefit rollercoaster."


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Contact Lee Bowman at BowmanL(at)
Distributed by Scripps Howard News Service,

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