2006 Medicare Drug Plan Has Adverse Effect on Maintenance Medications & the Elderly

Posted by John Harris on Thu, Nov 04, 2010 @ 12:01 PM

The Medicare Prescription Drug Benefit - What it means.

The Medicare prescription drug benefit begins on January 1, 2006; 44 million seniors and disabled persons will be eligible to participate. The benefit has an unusual—and largely untested—design: beneficiaries who incur more than $2250 in prescription drug expenditures will reach a coverage gap, known as the "doughnut hole," with coverage resuming once expenditures exceed $5100 The potential impact of this benefit design on the behavior of Medicare beneficiaries and on prescription drug utilization is uncertain.

What proportion of drug expenditures of Medicare enrollees will fall into the Medicare doughnut hole? What are the characteristics of these enrollees? Finally, what types of medications do they take?

Based on study findings, it is estimated that 35% of Medicare beneficiaries will fall into the doughnut hole (ie, incur at least $2250.01 in drug expenditures). The top 5 therapeutic classes that will cause beneficiaries to fall into the doughnut hole are expected to be antihyperlipidemic drugs, GI drugs, antidepressants, b-blockers, and calcium channel blockers; these drugs account for 26% of all prescriptions. We conclude that persons who take maintenance medications, particularly for heart disease, could be at risk for high out-of-pocket costs because of the doughnut hole, barring any additional coverage to fill the gap.


The benefit design was devised to reduce the cost to Medicare of the overall drug benefit. It is unclear how Medicare beneficiaries will react to this structure and whether they will stop or cut back on medications when they reach the doughnut hole.
Assuming that Medicare beneficiaries' prescribing patterns do not differ greatly from those of the third of Medicare beneficiaries who currently have employer-based supplemental coverage, and that the overall market in 2006 will not be radically different from that in the 2002-2003 study period, this analysis indicates that a large portion of Medicare beneficiaries will reach the doughnut hole.

Beneficiaries would hit the doughnut hole after 218 days, or a little more than 7 months. If they stopped taking their medications at this point, they would be missing about 40% of their prescriptions for the year. On average, about 26 prescriptions will need to be filled while beneficiaries are in the doughnut hole and are not receiving standard coverage.

Researchers have attempted to explain how the doughnut hole might affect prescribing behavior by examining the Medicare+Choice program. The majority of Medicare drug benefits in managed care have annual dollar limits or caps. Researchers surveyed Medicare+Choice beneficiaries with high medication costs and benefits capped on the plan's share of drug costs. They found that a higher proportion of patients who exceeded the caps reported using less-often-prescribed medications compared with controls. They found that the most frequently prescribed medications from 12 of the 20 therapeutic classes were for chronic conditions, such as hypertension, hyperlipidemia, and emphysema or asthma.

Analysts at Milliman USA expect the typical Medicare beneficiary to pay 66% of drug costs; the drug law will only cover 34% on average. Persons who may be particularly vulnerable to the effect of cost-sharing in the Medicare drug benefit are those at risk for cardiovascular disease. The most common diagnostic category among those who reached the doughnut hole was hypertension. Moreover, 6 of the 10 most commonly prescribed drugs in the dough nut hole were for prevention of cardiovascular disease.

Medicare beneficiaries will have several options for bridging the doughnut hole gap. Beneficiaries who have limited means—about a third of all beneficiaries—are eligible for comprehensive coverage with no gap.

For beneficiaries with higher incomes, several options may be available. These beneficiaries may be able to retain their employer-sponsored plan. Employers may choose to wrap around the Medicare Part B benefit and fill in some of the cost-sharing. In addition, some prescription drug plans or Medicare Advantage Plans may offer an enhanced alternative prescription drug plan for an additional premium.

Topics: General