Almost 7 million in 'Doughnut Hole'

The new analysis projects that 6.9 million people -- or nearly one in four who sign up for the new drug benefit -- could have spending in the "doughnut hole," where those with total drug costs exceeding the initial benefit limit ($2,250 in 2006) are projected to have out-of-pocket costs exceeding $750 in 2006.

Of the 6.9 million people who are expected to reach the doughnut hole in 2006, 2 million people (28 percent) have incomes less than 150 percent of the federal poverty level (in 2004, $13,965 for an individual); 2.8 million (42 percent) are in fair or poor health; and 3.8 million (55 percent) are women.

Help for Those with Catastrophic expenses

According to this analysis, the new drug benefit will substantially reduce projected average per capita out-of-pocket spending among Part D participants whose spending exceeds the $3,600 out-of-pocket catastrophic threshold.

Nearly half (3.1 million people) of those who reach the doughnut hole are projected to receive catastrophic coverage under the new benefit because they incur at least $3,600 in out-of-pocket drug costs. Under the new law, this group is expected to pay $3,784 out-of-pocket, on average, in 2006, compared with a projected $5,980 on average in the absence of the new law -- a reduction of 37 percent.

One in Four Projected to Spend Somewhat More

Overall, the analysis projects that three out of four who enroll in plans offering the new benefit (21.6 million people) are expected to have the same or lower out-of-pocket spending in 2006 than they would have without the new Medicare drug law.

The other one in four (7.4 million people) are expected to have higher out-of-pocket spending without taking into account the premium costs for the new coverage, unless they get supplemental coverage from another source.

For most (about 5 million people), the increases are expected to be modest -- $250 or less. This group includes many people with limited incomes who currently pay little or nothing for prescription drugs under their state Medicaid program, as well as people with low drug spending who currently have coverage for prescription drugs with a low or no deductible (such as through a Medicare Advantage plan). Under the standard Medicare drug benefit they will have to pay a $250 deductible before coverage begins, thus raising out-of-pocket costs above previous levels.

The 2.4 million people who are projected to face even higher out-of-pocket costs under the new drug benefit in 2006 include those with relatively high out-of-pocket drug costs who are projected to lose access to more generous prescription drug coverage than the new Medicare benefit provides, especially people who lose their employer plan coverage.

"Most are projected to get helped, and some will get helped more than others, but in any single year we would expect one in four to spend more out of pocket under Part D than they would have under the prior system," said Jim Mays, the report's lead author and ARC vice president.

The report, other materials and webcast from today's briefing in Washington are available online.