Will eliminating the donut hole break the budget?

Good article in today’s Washington Post about the potential downside of closing the “donut hole” that forces seniors to bear full financial responsibility for all prescriptions between $2700 and $4350
Between ¼ and 1/8  of Medicare beneficiaries with Part D coverage fall into this gap – which was established to lower the total cost of Part D coverage, and also as part of the Bush administration attempt to keep patients’ “skin in the game” so that they would comparison shop. 

There’s been a sea change in Washington – in the prior administration the mantra was to keep patients engaged by exposing them to a portion of the price of care. The current administration is pushing to eliminate substantial gaps in coverage.  Congress enacted minimum out of pocket deductibles for health savings account eligibility in the past.  Congress is now seeking to enact maximum out of pocket deductibles.   Harry Reid called the donut hole an “indefensible injustice for American's seniors." 

The big problem with this plan is that the funding is in part from the $80 billion pledged by pharmaceutical companies, which will use this to subsidize 50% of the cost of brand name drugs prescribed for Medicare beneficiaries in the ‘donut hole.”  This is a terrible idea, since many of these brand name medicines could be substituted, and the brand names remain a bad value even at half price.  Some brand names, of course, offer unique advantages, and this will be a valuable break for Medicare beneficiaries on those medications.

Some have claimed that increased medication adherence will prevent hospitalizations and therefore save money.  Since almost all medications are cost-effective and not cost-saving, this is not true.  Purchasing medications so that beneficiaries follow their doctors’ instructions will buy us better quality – but will not save dollars to fund the increased pharmaceutical spending.

Politically, closing the donut hole is critical.  Clinically, decreasing nonadherence among sick elderly is an excellent idea.  This will likely raise the overall cost of health care, though, while improving quality.