New Medicare Reform Act: Beware Of The "Doughnut Hole"

• Author: Corrine Parver
• Position: Partner, Dickstein Shapiro Morin & Oshinsky LLP
• Pages: 09

Corrine Parver, a WCL alumna, joined Dickstein Shapiro Morin & Oshinsky LLP as a partner in the spring of 1997, and is a member of the Firm's Health Care Practice. Prior to joining the Firm as a partner, Ms. Parver was the President of Parver & Associates, her own health care law consulting firm. From 1990 through 1994, she served as the President & CEO of the National Association for Medical Equipment Services (NAMES). From 1986 to 1989, Ms. Parver was the Associate General Counsel for the National Association of Rehabilitation Facilities. Ms. Parver serves as Chair of the Board of Directors of the National Family Caregivers Association and is on the Board of Trustees of the Clinical Social Work Institute.

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HERALDING THE MOST SIGNIFICANT expansion of the Medicare program since its creation in 1965, President Bush signed into law on December 8, 2003 H.R. ¹, the "Medicare Prescription Drug, Improvement, and Modernization Act of 2003" (the Act),1 which includes prescription drug coverage for senior citizens and millions of people with disabilities.² Implementation of this new Medicare "Part D" program begins January 1, 2006. Costs are estimated to reach $400 billion, at a minimum.³

The Act also includes numerous regulatory reforms, including incentives for private health plans, an experiment in competition between private health plans and Medicare, a limited form of means testing, and provisions regarding health savings accounts. Unquestionably, however, the Act's hallmark is its voluntary prescription drug benefit provision. But what is missing from this new benefit is equally important, if not more significant, than what is there.

Essentially, after paying an annual deductible of $250, approximately 75% of enrolled Medicare beneficiaries' drug costs would be covered, up to a cap of $2500. Thereafter, eligible seniors would have no coverage of their drug costs, until costs reach $3600 in out-of-pocket expenses - the so-called "doughnut hole" - whereupon catastrophic coverage would commence. This means that many, if not most, of our nation's elderly population will be responsible for paying all out-of-pocket expenditures between $2501 and $3599 for their prescription drugs: a fact that is glaringly omitted, or poorly explained in Administration press releases. Beneficiaries with annual incomes that fall below a set threshold (namely, 150% of poverty) will receive additional assistance.

Beneficiaries will be able to obtain drug...