Insurer scales back, widening Medicare prescription gap

The Humana plan, used by many seniors to bridge the 'doughnut hole,'
will no longer pay for brand-name drugs.

By Ricardo Alonso-Zaldivar, Times Staff Writer
LA Times
November 29, 2006

http://www.latimes.com/news/printedi...ck=1&cset=true

WASHINGTON — Seniors wanting to avoid the Medicare prescription
program's coverage gap have had one clear alternative: Choose a plan
that cost more but bridged the break in benefits.

But that option will be more restricted and more expensive next year.
The leading national plan that covers brand and generic drugs in the
gap — Humana PDP Complete — will no longer pay for brand-name
prescriptions.

More than 410,000 seniors in the plan will face higher premiums and
only be covered for generics in the coverage gap. Or, they can shop
for another insurer. In some states, no plan will be available next
year that covers brand-name medications in the gap.

Louisville-based Humana's decision to scale back its coverage raises
a new complication for Democrats vowing to reform the prescription
program, experts say. The party, which will take control of Congress
in January, has focused on authorizing Medicare to negotiate lower
prices with drug makers.

Humana's decision shows that the actions of insurers — the private
middlemen who deliver the benefit — also can have a profound effect
on seniors' pocketbooks. Negotiations with drug manufacturers may or
may not resolve such problems.

"When an insurance company has a plan design that it cannot make
money on, it can be pretty ruthless in what it does to correct that,"
said Robert Laszewski, a healthcare industry consultant. Humana said
recently it had paid out $1.33 in benefits for every $1 it took in
this year under the PDP Complete plan.

Generic drugs, usually copies of brand-name drugs on which the
patents have expired, cost a lot less. But no generics are available
for relatively new drugs, including many medicines for conditions
ranging from cancer to psychiatric problems.

Moe Tawil, 70, a retired engineer from Manhattan Beach, says he can
understand why the insurer would need to raise premiums, but he
questions the decision to curtail coverage of brand-name drugs.

"The fact that the plan can significantly change is at best annoying,
and at worst it can create quite a problem for some people," he
said. "It just causes a tremendous amount of confusion and heartache.
You don't buy auto insurance to have them tell you, 'By the way,
we're not going to cover collision next year.' "

Tawil's wife, Barbara, is on Femara, a pill taken daily to prevent
the recurrence of breast cancer. Considered more effective than
tamoxifen, the medication costs more than $700 for a 90-day supply.
The Tawils now pay $150 through her PDP Complete plan. There is no
generic equivalent for Femara, which is manufactured by Novartis.

"I went through a lot this year to find this plan, and I certainly
don't want a plan that won't cover one of my medications," Barbara
Tawil said. "I would like some consistency in coverage for next year."

Although the Medicare prescription program has proved popular among
seniors, the coverage gap known as the doughnut hole remains a
challenge. Congress designed the break in benefits to cut program
costs, and then indexed the gap for inflation.

That means the doughnut hole will widen next year, to just over
$3,050 from the current $2,850. When a beneficiary reaches $2,400 in
total drugs costs, no coverage is provided until the person reaches
$5,451.25 in costs. After that, Medicare pays 95%.

Although more plans will offer coverage of generic drugs in the gap
next year, the number covering brand-name medications will drop from
33 to 27. Fewer than one-third of Medicare prescription plans offer
any sort of coverage in the gap, according to a recent study for the
Kaiser Family Foundation.

Some advocates for seniors say insurers have engaged in misleading
marketing.

"This illustrates the exploitative marketplace older Americans are
facing," said Robert M. Hayes, president of the Medicare Rights
Center, a New York advocacy group. "The marketing strategy was
premised on bait-and-switch, aggressive marketing and low premiums in
Year One to bring the customer in, and then reduced benefits and
increased costs."

Humana rejects that charge.

"After reviewing the 2006 experience with our complete plan that
covered brand drugs through the coverage gap, it became clear to us
that we could not continue to do that in 2007 and be able to offer it
at an affordable premium," spokesman **** Brown said.

"When we bid for the 2006 plans," Brown said, "we assumed other
companies would do as we did and offer one plan that covered brand
drugs through the gap. That did not happen. We under-priced the plan
based on that erroneous assumption. In short, our scenario just did
not play out as we assumed."

A Medicare official declined to comment. The agency has been
stressing the growing availability of coverage for generics in the
gap.
Seniors who want to switch from Humana's PDP Complete plan have until
Dec. 31 to do so, although Medicare is recommending they act by Dec.
8 to avoid possible problems at the pharmacy in January.

However, Medicare may have inadvertently added to the confusion by
telling seniors they don't have to switch if they are satisfied with
their current plan, Hayes said. "Many people will just sit still," he
added.

Although Democrats have not directly addressed the issue of
disruptions in coverage, one of the plans they are discussing might
offer a remedy.

Sen. Richard J. Durbin (D-Ill.) and Rep. Pete Stark (D-Fremont) have
called for Medicare to set up a government-administered prescription
plan to compete with the private ones. Such a government plan would
not have to make a profit, and could be set up to provide stable
coverage from year to year.

"If done properly, it could offer a safe haven," Hayes said.