The Infamous Doughnut Hole: Why It Is Very Bad

One of the nutty aspects of the Medicare prescription drug program is
the so-called " href="http://www.tompaine.com/articles/2006/09/21/the_face_on_the_doughnut_hole.php">doughnut
hole."  The doughnut hole occurs once the
beneficiary reaches a certain spending limit.  This is
described in a recent href="http://www.washingtonpost.com/wp-dyn/content/article/2006/09/24/AR2006092400957.html">Washington
Post article:

Under the standard plan, however, the government
picks up the bulk of
drug costs only until the beneficiary and the government together have
spent $2,250 for the year. At that point, beneficiaries must pay 100
percent of costs until they have spent a total of $3,600 of their own
money. Then the federal subsidy resumes, paying 95 percent of any
additional expenses.

A lot has been written about this ( href="http://liberaldoomsayer.blogspot.com/2006/09/stuck-in-doughnut-hole.html">1
href="http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20060922/NEWS/609220588/1017/NEWS0501">2
href="http://takeaction.wordpress.com/2006/09/22/the-medicare-doughnut-hole/">3
href="http://drinkingliberally.org/blogs/oakland/archives/2006/09/the_medicare_dough_1.html">4
href="http://thenexthurrah.typepad.com/the_next_hurrah/2006/09/the_wrong_price.html">5
6
7
href="http://www.freespeech.com/index.php?/weblog/simmons_courtney_clash_over_change_in_washington/">8
9
href="http://readdammit.blogspot.com/2006/09/gop-culture-of-corruption-of-their-k.html">10
href="http://lynnsrants.blogspot.com/2006/09/medicare-part-dumbangerouseceptive.html">11,
et. al.).  The two points I want to make
are these:  from a usability perspective, the plan stinks.
 And it is dangerous.

One could argue, using the faith-based principles of free market
economics, that the market is reasonably efficient, and that where
there is a true need, the market will take care of it.   That
is basically the argument put forth by Connecticut Citizens in Action, href="http://ct-cia.blogspot.com/2006/09/dear-comrade-courtney-we-dont-need.html">here.
 They cite the Walmart plan to sell deeply discounted generic
drugs as an example of a free-market solution to the doughnut hole
problem.  



I applaud the Walmart program.  It will help.  But it
will not come particularly close to solving the problem.



From the practitioners point of view, the main problem with the current
system is that it is too complex.  The doughnut hole just adds
another layer of complexity to a rat's nest of interlocking problems.
 Drugs that were affordable yesterday are not affordable
today.  



Here's a snapshot of the The patients on Medicare Plan D tend to be
elderly; many of them are taking multiple medications, for multiple
medical problems.  All of those medications have the potential
for pharmacokinetic and pharmacodynamic interactions.
 Furthermore, the different disease states can affect each
other.  



As a result, it often is difficult to figure out how best to change one
drug in a multi-drug regimen, without causing problems.  If
certain drugs are unavailable, then the problem is much more difficult
to solve.  What is worse, is you can spend months adjusting
various drugs to get a good outcome, only to find that you have to go
back and start over again, when the patient is no longer able to afford
one or more of the drugs.  



Clinicians already have a hard time with any plan that uses restrictive
formularies.  

Definition: href="http://www.hrsa.gov/opa/glossary.htm">Formulary:
A preferred list of drug products that typically limits the number of
drugs available within a therapeutic class for purposes of drug
purchasing, dispensing and/or reimbursement. A government body,
third-party insurer or health plan, or an institution may compile a
formulary. Some institutions or health plans develop closed (i.e.
restricted) formularies where only those drug products listed can be
dispensed in that institution or reimbursed by the health plan. Other
formularies may have no restrictions (open formulary) or may have
certain restrictions such as higher patient cost-sharing requirements
for off-formulary drugs.

Although each individual formulary might make sense, the fact is, there
are dozens of different companies and they all have different
formularies.  Plus, the patient will sometimes switch from one
company to another, causing a change in the formulary.  Or,
their employer may switch, or the insurance company itself will change
the formulary.  Any of these changes introduces risks:
specifically, it introduces risks of drug errors, drug interactions,
and drug noncompliance.



Although the risks tend to be small, they are multiplied by a large
factor, depending on how many patients are affected.  In the
case of the doughnut hole, these risks are multiplied by a factor of
several million.  



Now, consider that each of these risks carries a certain cost.
 Some of the costs are small, such as an extra trip to the
pharmacy.  (Which for certain elderly or disabled individuals,
is a nontrivial exercise.)  Other may be large, such as an
emergency department visit, or hospitalization.  



If the objective was to save money, it would have made a lot more sense
to have higher copays that are the same throughout the year, rather
than a low copay initially, then no copay at all, then another low
copay.  It would have been possible to save the same amount of
money, without introducing all those risks.