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Sep 07, 2009
 |  BioCentury  |  Politics, Policy & Law

Filling the hole has its price

A Congressional Budget Office analysis of House Democrats' plans for eliminating the coverage gap, or "doughnut hole," in Medicare's Part D outpatient prescription drug program illustrates the conundrums Congress and the public face in reforming the healthcare system.

The proposal, a key selling point for America's Affordable Health Choices Act of 2009 (H.R. 3200), would increase premiums for all senior citizens. But most of them would not benefit from elimination of the coverage gap, according to CBO's projections.

In effect, the House plan takes money from the pharmaceutical industry to close the coverage gap, but in the process it also sets up a situation in which all Medicare beneficiaries incur higher costs to pay for enhanced coverage that benefits only the small proportion of senior citizens who would have fallen into the coverage gap.

The gap was engineered into Part D as a cost-saving measure.

When Congress created the Medicare outpatient drug benefit, it decided to commit the federal government to pay about 75% of drug costs for Medicare beneficiaries. The remaining 25% would come from premiums, deductibles and co-pays.

At the same time, there wasn't an appetite to commit the Treasury to provide this entitlement without limit. Instead, Congress set an upper bound to the government's spending on outpatient drugs, and based on this figure set a limit on the spending per beneficiary. After that...

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