According to the Congressional Budget Office (CBO), the House health reform legislation known as the Tri- Committee bill will re-work prescription drug coverage for Medicare beneficiaries to reduce their out-of-pocket spending. The House Tri-Committee bill proposes to eliminate the “donut hole,” the point beyond which the costs of prescription drugs are paid solely by Medicare Part D plan enrollees. The CBO projects that, by providing drug coverage for the many Medicare beneficiaries who currently hit the donut hole, the overall cost of the coverage will increase for all Medicare beneficiaries with prescription drug coverage under Part D.

The current approach was an attempt by Congress to provide drug benefits under Medicare at a lower cost by building in an annual gap in coverage (i.e., the “donut hole”) which, when reached, requires payment by the Medicare beneficiary for a certain dollar amount of prescriptions drugs before coverage for drug costs would resume. Under the House Tri- Committee bill, the CBO calculates that Medicare drug coverage premiums will increase 5 percent in 2011 and will increase more than 20 percent over the next decade. Since there also are many seniors who never reach the donut hole, these individuals will thus see their premiums increase with no appreciable benefit. However, the CBO’s analysis confirms that the Tri-Committee bill reflects the standard approach to pricing prescription drug benefits found in the insurance industry, as a whole.