Few private insurance plans provide brand-name prescription drug coverage during Medicare 'Doughnut Hole'

Apr 02, 2007--The Los Angeles Times on Monday examined the lack of private health insurers offering brand-name prescription drug coverage for Medicare beneficiaries during the so-called "doughnut hole" coverage gap.

Under the doughnut hole, beneficiaries are responsible for 100% of total prescription drug costs between $2,400 and $5,450. Medicare then covers 95% of prescription drug costs beyond $5,450.

Some beneficiaries, such as those with multiple sclerosis or rheumatoid arthritis, must take brand-name drugs because there are no generic alternatives. Las Vegas-based Sierra Health Services in 2007 said it would offer comprehensive coverage of brand-name medications for beneficiaries during the coverage gap in exchange for high monthly premiums. However, the plan lost $3 million in the first month of operation.

Sierra in February announced that it no longer would cover brand-name drugs in the doughnut hole. Around that time, hundreds of beneficiaries began receiving letters that their Sierra coverage was being discontinued for nonpayment, although some said they already had paid their monthly premium, the Times reports.

Medicare officials recently intervened to order that coverage be reinstated for about 2,000 beneficiaries, including about 200 people with HIV/AIDS.

According to the Times, Sierra's case "draws attention to problems inherent in Medicare's partnership with private insurers to provide drug coverage for" beneficiaries. Because Sierra was the only major plan that covered brand name drugs in the gap this year, beneficiaries "may have no comparable option for 2008," the Times reports.

Humana in 2006 also tried offering brand-name drug coverage during the gap but lost money and did not offer the plan again this year. Peter O'Neill, Sierra's vice president for public and investor relations, said, "There are two plans that have had experience with providing (brand-name) coverage in the doughnut hole, and neither one of us got it correct."

O'Neill called on policymakers to modify the drug benefit to make brand-name coverage more comprehensive. However, the Times reports that Sierra's experience "may actually ... reinforc[e] insurers' reluctance to cover brand-name medications" (Alonso-Zaldivar, Los Angeles Times, 4/2).