It's Time to Bail Out Seniors Trapped in the Medicare Donut Hole!

Medicare D, which became effective in January of 2006, was a major step forward in providing prescription drug coverage to one segment of our population: those age 65 and older. As of 2009, 90% of all seniors (Medicare beneficiaries) had signed up for Medicare D, which is voluntary, or had other insurance coverage for prescription drugs.1

The Medicare population accounts for one third of all prescription drug use in the US.2 The vast majority (87%) of seniors have at least one chronic condition that requires life-long medication, and more than 45% have 3 or more chronic conditions.3 The average number of prescription drugs for seniors with one of the commonest chronic conditions, congestive heart failure, was 7.5 with an annual cost of $3823 in 2001.4 The health of our Medicare population is dependent on their being able to afford prescription drugs.

Unfortunately, 2 features of the Medicare D legislation jeopardize the ability of seniors to afford the drugs they require.5 The legislation forbids Medicare from negotiating drug prices with drug manufacturers. Unlike the Department of Defense, the Veterans Administration, and Medicaid, which are able to negotiate discounts of 30 to 50%,6 Medicare is forced to pay the manufacturers' asking price. As a result, Medicare and Medicare beneficiaries pay more for prescription drugs than the citizens of any other country. Medicare pays 30% more for prescription drugs than Medicaid pays. In 2 years (2006 and 2007) Medicare paid $3.7 billion more than Medicaid would have paid for the same prescription drugs.7

The second feature of the legislation that jeopardizes the ability of seniors to afford prescription drugs is the infamous “donut hole.”8 Once a deductible of $250 has been paid by the senior, Medicare pays 75% of the cost of drugs and the senior pays 25% until the total amount paid by Medicare and the patient reaches $2250. At that point, the senior pays 100% out of pocket until the total amount paid by the patient and Medicare reaches a catastrophic limit of $5100. After that point has been reached, the senior is freed from the donut hole and Medicare pays 95% of further prescription costs. In one study,9 only 3%, and in another study,10 only 4% of seniors falling into the donut hole emerged to receive catastrophic coverage.

Zhang et al,10 reported that 25% of seniors reached the donut hole in 2006. The proportion reaching the hole increased as the number of chronic conditions increased. A third of patients with both hypertension and diabetes, and more than 60% of those who also had hyperlipidemia and congestive heart failure fell into the hole.10 The Kaiser Family Foundation reported that 26% of seniors landed in the donut hole in 2007.11

While in the donut hole, the senior must pay the total cost of additional drugs out of pocket. There are multiple studies examining what happens when out-of-pocket expenses for drugs increase. Many patients resort to stinting: not filling prescriptions, not refilling prescriptions, or decreasing the prescribed dose because of the cost. One study found that 15% of all Americans under age 65, and 30% of those with low income, failed to fill a prescription because of cost in 2007.12

In the Kaiser report,11 15% of seniors stopped taking their medications when they were in the hole. Zhang et al,10 reported a 14% reduction in medication use while in the hole. Schneeweiss et al,9 reported that when seniors fell into the donut hole they decreased the use of such essential medications as warfarin, statins, and clopidogril, each of which has been shown to decrease the incidence of myocardial infarction and/or stroke.

The seniors most likely to stop taking their medications when out-of-pocket expenses increase are those with the lowest income,12, 13 those with the largest out-of-pocket expenses,13 and those with multiple chronic conditions requiring prescription drugs.12

In one Medicare HMO, a total of 30% of participants stinted.13 Of those with an annual income >$48,000, 17% stinted compared to 38% of those with an annual income less than $12,000. When total out-of-pocket expenses were less than $50/month, 16% stinted, but when out-of-pocket expenses exceeded $300/month, 47% stinted.13

Many studies have shown that stinting on medication leads to adverse health outcomes for seniors and increases Medicare expenses.13, 14, 15, 16

In one US HMO a decision was made to only cover generic drugs. As a result HMO drug costs decreased and patient out-of-pocket drug expenses increased. However, the number of hospital days increased and no money was saved.14

Hsu compared Medicare HMO patients with a prescription cap of $1000/year to HMO patients without a cap.15 Those with a cap had poorer adherence to medications because of stinting. The result was poorer control of blood pressure, lipids, and diabetes. This led to more emergency room visits and more non-elective hospital admissions.

Another example of what happens when out-of-pocket expenses for medications increase was reported in Quebec.16 Prior to 1996, prescription drugs were free for the elderly if poor and $2 per prescription if not poor. After 1996, there was a co-pay of $25 per prescription. After the new law 9% of seniors discontinued essential drugs. In this group emergency room visits increased by 43%, and serious adverse events (death or hospital admission) increased by 117%.16

The evidence is quite clear. As out-of-pocket expenses for prescription drugs increase, non-compliance because of medication stinting increases. Health outcomes worsen, with resultant increased emergency room visits and hospital admissions. Restricting prescription drug coverage does not save Medicare money, it increases Medicare expenses!

Prescription drug costs will continue to increase for seniors. The number of Medicare beneficiaries with chronic conditions will continue to increase, and new therapy guidelines as with hypertension17 and hyperlipidemia18 will increase the number requiring chronic medications. New brand name drugs, and direct-to-consumer advertising will increase the number of drugs prescribed, and we can expect continued escalation of the price of many existing drugs.19

Anderson et al have suggested a cost effective way to eliminate the donut hole.20 If Medicare was allowed to negotiate drug prices with the manufacturers, the cost savings would be more than enough to eliminate the donut hole. Elimination of the donut hole would lead to fewer emergency room visits, fewer hospital admissions, and a reduction in Medicare expenses. More important than the monetary savings, elimination of the donut hole would improve the health of our senior population.