For Immediate Release                                                              Contact: Michael Freeman
July 17, 2006                                                                                          202-452-8700
                                                                                                               mfreeman@hlc.org

WHAT IS THE IMPACT OF THE “DOUGHNUT HOLE?”
FEWER THAN 1 IN 10 BENEFICIARIES WILL ENTER MEDICARE DRUG BENEFIT COVERAGE GAP & PAY FULL DRUG COSTS OUT-OF-POCKET

Beneficiaries With Spending in the Coverage Gap Who Had No Prior Drug Coverage
Will Still Have Average Savings of $2,000

WASHINGTON, D.C. – New research shows that approximately 8 percent of Medicare beneficiaries will find themselves fully responsible for all prescription drug costs they incur in the coverage gap under the Medicare prescription drug benefit.

The new study, prepared by PricewaterhouseCoopers, LLP and commissioned by the Healthcare Leadership Council, shows that more than 90 percent of Medicare beneficiaries will either not reach the coverage gap or will have at least some coverage available to them in the gap. Under the law that created the Medicare Part D prescription drug coverage, annual out-of-pocket drug spending between $2,250 and $3,600 is not covered by the standard Part D benefit.

According to the PricewaterhouseCoopers research, Medicare beneficiary drug spending and coverage breaks down as follows:

• Thirty-eight percent of beneficiaries have prescription drug coverage from plans outside of Medicare Part D.
   
• Twenty-three percent will be eligible for low-income subsidies, and therefore not affected by the coverage gap.
   
• Sixteen percent will have annual drug spending below $2,250 and will not reach the coverage gap.
   
• Ten percent are not enrolled in a Part D program and have no other drug coverage.
   
• Six percent have chosen “enhanced” Part D plans that provide some prescription drug coverage in the coverage gap.
   
• The remaining 8 percent will have some spending in the coverage gap during 2006.

“This research does underscore the importance of letting prescription drug plans compete on the basis of cost and value,” said Mary R. Grealy, president of the Healthcare Leadership Council, a coalition of chief executives of many of the nation’s leading healthcare companies and organizations. “A single government one-size-fits-all program would not have offered options to cover the so-called ‘doughnut hole.’ Because we have choice and competition, over two million people are taking advantage of that extra coverage.”

According to the PricewaterhouseCoopers research, roughly one-third of the Medicare beneficiaries who enter the coverage gap will have spending in the gap of less than $750. Another 24 percent will have spending in the gap of less than $1,750.

Based on average prescription drug spending levels, the study shows that Medicare beneficiaries with spending in the gap and no previous prescription drug coverage will still have approximately $2,000 in cost savings during 2006.

“Whether the coverage gap continues is, of course, an issue for Congress to wrestle with,” Ms. Grealy said. “But we shouldn’t lose sight of the fact that the majority of those who have coverage gap spending will still be considerably better off than they were before the enactment of the Medicare drug benefit.”