NorthJersey.com

Medicare 'Doughnut Hole' Eating Seniors' Cash

NorthJersey.com — Thursday, July 13, 2006

BY MARY JO LAYTON
THE BERGEN RECORD STAFF WRITER

Seven million Americans enrolled in the new Medicare drug plan are facing a massive gap in benefits that will force them to pay out of pocket for pricey prescriptions, a state advocacy group said Wednesday.

Old Tappan retiree Melba Heck has already fallen into the so-called "doughnut hole" in her Medicare Part D coverage. Just this month, she had to pay $400 for medication even though she's paid $50 a month all year for drug coverage.

"This is highway robbery," said Heck, a retired nurse. "We're not extravagant people. For the first time in 10 years, I've had to cut back on my church pledge."

The report, released by New Jersey Citizen Action and Americans United, calls on Congress to offer more generous drug benefits. They also want Medicare to use its free-market muscle to negotiate with drug companies for cheaper medicine.

If changes aren't made, advocates warned, seniors on fixed incomes will struggle to pay for life-sustaining prescriptions, choices that may result in more illness and even death.

"Many seniors can't imagine that if they're paying for a premium all of a sudden there's not going to be a benefit," said Rep. Frank Pallone, D-Monmouth, who supports closing the gap. "Hopefully there will be a clamor to change it and require the government to renegotiate prices."

Under Part D, enrollees pay a $250 deductible for their medications. After that, 75 percent of drug costs are covered up to $2,250. Once they reach this limit, however, seniors must pay completely out of pocket - even though they're still paying a premium that ranges from $24 to $59 per month in New Jersey. They must pay for their own drugs until costs exceed $5,100 when catastrophic coverage kicks in.

This gap in coverage was one of several provisions criticized when the government launched its first drug benefit ever offered to seniors. The coverage has been plagued by confusing choices and a last-minute scramble to enroll millions.

In New Jersey alone, there are 49 private plans to choose from. Six of these plans protect seniors from falling into the doughnut hole – some by using cheaper generics instead of brand-name drugs. However, the premiums are nearly twice as expensive, Pallone said.

"In the long run, it's not going to be affordable to many seniors," Pallone said.

Nearly 930,000 New Jersey residents have enrolled in a Medicare drug plan.

The average enrollee's total drug spending for 2006 is expected to cost $3,081, said Jeff Cruz, senior policy analyst for the Institute for America's Future, a Washington, D.C.-based advocacy group which completed the benefit analysis.

While many seniors have already reached limits in coverage, the average beneficiary is expected to start paying for prescriptions on Sept. 22, Cruz said. He could not estimate how many seniors are already paying out-of-pocket for medication while still paying premiums.

However, the picture gets grimmer each year, as deductibles increase and the coverage thresholds rise -- especially for seniors who have an annual average income of $14,000. With a cost of $3,600 to get out of the doughnut hole, few can afford it, Cruz said.

"It should really be called 'the black hole,' " Cruz said. "People who fall into the doughnut hole don't get out."

The consequences can be deadly, Cruz said. He cited a New England Journal of Medicine report that found that seniors who faced limits on drug coverage were more likely to skip doses and visit hospital emergency rooms more often. They were more likely to die sooner – in fact, they had a mortality rate 22 percent higher than those without a limit on benefits, he said.

Ringwood resident Dave Judovin fears his mother will have to "bite the bullet" next month when she reaches the $2,250 limit. He expects her to start taking a prescription that costs $3,000 a month.

"She'll dip into savings and it will certainly hurt," he said. "For most seniors this is the case. How are retirees on fixed incomes supposed to handle this?"

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