Drug-plan gap trips up many older Americans

Donna and Grover Stark together take $2,000 of prescription drugs every month to treat a host of maladies, including Grover's arthritis and Donna's emphysema and heart failure. So the Port Angeles couple rushed last December to enroll in Medicare Part D, the new federal prescription-drug plan.

Initially, the Starks were euphoric. The Coventry AdvantraRx plan paid for most of their drugs, minus $20 copays.

Then one day the coverage stopped. A pharmacist told Donna Stark that coverage would not resume until the Starks, who are in their 70s and retired, each had spent $3,600 out of pocket for drugs.

"We started wondering what in the hell was going on," said the Starks' daughter, Cheri Brudevold, who cares for her parents. At first she thought it was a scam.

It wasn't. The Starks had fallen into a complicated bureaucratic chasm called the "doughnut hole" — a gap specifically designed as part of the Part D program that forces Medicare patients to pay 100 percent of their drug costs for a period after they reach a certain spending threshold.

More than 3 million Americans are expected to sink into the doughnut hole this year. Experts estimate that this year's drug purchases by the average senior in Part D will reach the threshold next month. And when it does, many unwitting seniors will find the doughnut hole as vexing as it was unexpected.

"I've never known insurance that has this hole in the middle," said Liz Mercer, a Part D expert with the Statewide Health Insurance Benefits Advisors (SHIBA) program at the state Insurance Commissioner's Office.

"It doesn't feel logical at all."

Convoluted design

Congress crafted Part D with two main goals: to provide affordable coverage for seniors with average drug expenses and to provide catastrophic coverage for people with huge drug bills.

Under the standard Part D plan, Medicare pays for two-thirds of the first $2,250 in purchases. It also pays for 95 percent of the cost of drugs after $5,100. But in between those amounts is the doughnut hole — $2,850 wide — that seniors must cover entirely out of their pockets.

Even seniors who may be aware of the hole still underestimate its size, because they incorrectly think it stretches only from $2,250 to $3,600 instead of $5,100. But the hole actually ends when the patient's personal spending for the year has topped $3,600. When added to what Medicare has contributed to the drug purchases along the way, it equals $5,100 worth of purchases.

Plan D's convoluted design has even the experts perplexed.

Volunteers at SHIBA have spent months guiding befuddled seniors through 70 different Part D plans sold by private insurers in Washington. Deciphering Part D is so mentally challenging that some volunteers have come to joke that it's "the government's way of staving off Alzheimer's," Mercer said.

About 625,000 people in Washington now have Part D coverage. About 225,000 of them voluntarily enrolled, and about 400,000 others were automatically signed up or rolled over from retiree plans or from Medicaid.

Many retirees and all of the low-income people rolled over from Medicaid are exempt from the doughnut hole because their employers or the government pays to cover the gap. Seniors whose incomes are below 150 percent of the federal poverty level ($14,700 singles; $19,800 couples) can apply for subsidies from the Social Security Administration to plug the gap.

But PricewaterhouseCoopers, the auditing giant, estimates that nationally 24 percent of all Medicare beneficiaries, or about 10.4 million people, belong to plans that have the doughnut hole. Seven million of them are not expected to buy enough drugs to trigger the coverage interruption.

Still, that leaves 3.4 million people in the U.S. exposed to the gap.

Sticker shock

Many seniors knew the doughnut hole was coming but are still sticker-shocked when it sets in.

Bob Murphy of Port Angeles is a retired senior vice president of a medical-insurance company who volunteers to help other seniors through the SHIBA program. Even so, he said he felt a jolt when he had to start paying in full for his wife's prescriptions in May.

Wife Diane's prescriptions include a daily shot of Copaxone for multiple sclerosis that costs about $1,300 a month.

"Even though I knew it was coming, it was still a shock," Bob Murphy, 67, said. "It's a lot of money."

Until last year, the Murphys had retiree drug coverage through his former employer that picked up about 85 percent of the cost of Diane's prescriptions. But his former company, Blue Cross and Blue Shield of Kansas City, switched to a Part D plan in January so it could receive federal subsidies for it.

Diane Murphy has since gotten through the doughnut hole by spending $3,600 of the couple's own money; now they have to pay only 5 percent of her drug costs until the end of December. One month's supply of Copaxone now costs them just $68.

For the Murphys, Part D is well worth its cost. Diane takes about $20,000 worth of drugs a year, so even with the doughnut hole Medicare covers about 80 percent of their drug bills.

Premiums for Part D plans average $24 a month. Seniors can pay more for plans without the coverage gap. But only six of the 45 stand-alone Part D plans sold here pay for generic drugs during the doughnut hole and only one, Humana Complete, covers brand-name prescriptions.

Michael Marchand, a Seattle spokesman for the Centers for Medicare & Medicaid Services, notes that by the time most seniors reach the doughnut hole they will have received at least $1,500 in benefits through Part D — an expense they otherwise would have borne themselves.

"Don't get caught up on how much you paid last month," Marchand said. "You really have to look at what the program provides for you during the course of the year."

Part D has open enrollment between Nov. 15 and Dec. 31, when seniors can sign up for the first time or switch plans. Some seniors may be better off with more expensive plans that don't have the hole, or with plans that cover all the drugs they take.

As for the Starks, they're too upset to prepare for open enrollment, said their daughter-in-law, Meg Stark. The couple lives on $2,400 from Grover Stark's Burlington Northern railroad pension. His wife goes to the Sequim food bank once a month.

Grover and Donna Stark must each spend $3,600 out of pocket before Part D will resume coverage under his or her plan. By the time they both emerge from the doughnut hole, the couple would have bought a combined total of $10,200 worth of prescriptions. And the insurance would have paid for only 30 percent of that.

Said Meg Stark: "Isn't that crazy?"

Kyung Song: 206-464-2423 or ksong@seattletimes.com