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Breaking: House To Fill In Donut Hole

The three House committees will be releasing their version of health care legislation. And according to people familiar with its contents, people like me are going to like it a lot better than what we've been getting out of either of the two Senate committees this week.

So far, I know just one detail--something that hasn't gotten much discussion in the reform debate so far, but perhaps offers a hint of the kind of legislation we'll see.

Medicare Part D, the privately administered drug benefit for seniors, famously has a "donut hole"'--a gap in which coverage stops, altogether, until a recipient has spent a great deal more money. In other words, if you're on Medicare Part D, you pay about a quarter of your drug bills until you've purchased prescriptions worth $2,700. After that, you pay the entire bill for any drugs you pay, until the total reaches $6,154. Then the coverage kicks back in and covers everything. (Details here.) 

It's confusing and, from an actuarial standpoint, illogical. It's also bad for beneficiaries, since it tends to penalize the chronically ill and has been shown, by studies, to leave many of them rationing--hmmm, where have we seen that word--their own medicaiton. As a recent Kaiser Family Foundation study put it:

one in four (26 percent) Part D enrollees who filled any prescriptions in 2007 reached the coverage gap. This includes 22 percent who remained in the gap for the remainder of the year, and 4 percent who ultimately received catastrophic coverage.  Applying this estimate to the entire population of Part D enrollees, the analysis suggests that about 3.4 million beneficiaries (14 percent of all Part D enrollees) reached the coverage gap and faced the full cost of their prescriptions in 2007. 

Beneficiaries taking drugs for serious chronic conditions had a substantially higher risk of a gap in coverage under their Medicare drug plan.  For example, 64 percent of enrollees taking medications for Alzheimer’s disease reached the coverage gap in 2007, as did 51 percent of those taking oral anti-diabetic medications and 45 percent of patients on antidepressants. As noted above, these percentages are among Part D plan enrollees who did not receive low-income subsidies.

Conducted by researchers at Georgetown University, NORC at the University of Chicago and Kaiser, the study found evidence of patients changing their use of prescription drugs when they are required to pay the full cost of medications in the coverage gap.  Across eight classes of drugs examined--used to treat a variety of relatively common chronic conditions--15 percent of Part D enrollees who reached the gap stopped their drug therapy for that condition, 5 percent switched to another medication in the class, and 1 percent reduced the number of drugs they were taking in the class. 

The House legislation, according to a senior House staffer, will fill in the hole. I have no idea how much this costs--not a small issue given the enormous challenge of paying for reform. But there's an important political angle here. As Stanley Greenberg notes in our magazine this week, seniors have not been very enthusiastic about the health reform plans they're hearing about. Maybe this will help change it.

--Jonathan Cohn