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CCH® BENEFITS — 9/5/08

Many Medicare Part D Enrollees Reached The Coverage Gap In 2007

From Spencer's Benefits Reports: More than one-fourth (26%) of Medicare Part D prescription drug enrollees who filled any prescriptions in 2007 reached the drug plan coverage gap, or “doughnut hole,” and many stopped taking their medications for chronic conditions during that gap. The proportion of Part D enrollees who reached the coverage gap rose with age, to one-third of enrollees age 85 and older, versus one-fourth of enrollees age 65 to 74. These are the findings of a study recently released by the Kaiser Family Foundation (KFF), The Medicare Part D Coverage Gap: Costs and Consequences in 2007.

The Medicare Part D prescription drug benefit was first implemented beginning Jan. 1, 2006. The benefit is offered through many regional and national prescription drug plans and insurance companies with varying plan designs and requirements, and related premiums, based on a “standard Part D” benefit. The standard Part D annual benefit provides for a deductible, a copayment up to a prescribed coverage gap amount, beneficiary payment of the entire cost of the drug during the coverage gap until the beneficiary’s out-of-pocket expenses reach a specified amount, and then catastrophic coverage.

For 2008, the standard Part D plan provides that an enrollee pays a $265 deductible; then 25% of the drug costs until the total drug costs reach $2,400; and during the coverage gap, the entire cost of their drugs up to $3,051; for a total enrollee out-of-pocket cost of $3,850. Once the coverage gap out-of-pocket is completed, catastrophic coverage provides for a 5% enrollee copayment. The Part D annual premium averages $328, Kaiser found. Many Part D plans require a fixed-dollar copayment, rather than a percentage copayment, until the coverage gap is reached, and some may require no or lower deductibles. However, most plans also restrict coverage mainly to generic drugs.

Extrapolating the 2007 observations, about 3.4 million Medicare Part D beneficiaries (14% of all Part D enrollees) reached the coverage gap in 2007 and thus faced paying the entire cost of their drugs. Of the 26% of Medicare beneficiaries who reached the coverage gap, only 4% attained catastrophic coverage, while 22% remained in the coverage gap, the Kaiser researchers found. The KFF researchers, along with researchers from Georgetown University’s Health Policy Institute and the NORC (National Opinion Research Center) at the University of Chicago, found evidence that Part D beneficiaries who reached the coverage gap changed their prescription drug use.

Among the reviewed eight drug classes used to treat fairly common chronic medical conditions, 15% of Part D enrollees who reached the coverage gap stopped taking their medications, 5% switched to another medication; and 1% reduced the number of medications that they took in the same class, the researchers found. Among Part D enrollees who stopped taking their medications once they reached the coverage gap, 10% were diabetics, 18% were taking osteoporosis drugs, and 20% were taking proton-pump inhibitors for ulcers and acid reflux. For Medicare enrollees with serious chronic health conditions such as diabetes, stopping their medications, even for a brief period of time, has serious health consequences, the KFF report noted. The drugs reviewed for the study are used to treat the following eight chronic conditions: Alzheimer’s disease, high cholesterol, depression, diabetes, gastroesophageal reflux disease, heart failure, hypertension, and osteoporosis. Among these chronic disease classes, a much greater proportion of enrollees taking medications for Alzheimer’s (64%) than those taking medications for ACE inhibitors (34%) reached the coverage gap.

Average out-of-pocket monthly expenses for Part D enrollees in the coverage gap nearly doubled from $104 to $196, and the great majority (84%) did not have enough expenses to obtain catastrophic coverage. The KFF study also found that those Part D enrollees who reached the coverage gap paid the full cost of their prescription drugs, with no assistance from the Part D plan, for an average of slightly more than four months, but received catastrophic coverage for less than one month.

For more information, visit http://www.kff.org/medicare/upload/7811.pdf.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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