Medicare's 'Doughnut Hole'

(CBS)  Medicare Part D is providing prescription drug coverage to millions of older Americans. But ever since the program went into effect in January, there's been an epidemic of confusion and headaches. As CBS News correspondent Wyatt Andrews reports, here comes another one: the "doughnut hole."

For Paul Jutras, who takes 14 medicines every day, the Medicare drug benefit seemed to stop as soon as it began.

"Asticol was $253.30," he says. "They paid nothing. And I paid 253.30."

The problem is that he's fallen into a gap in coverage called the "doughnut hole" — in which seniors pay for all of their drugs themselves. On Jutras' low income, and with this many prescriptions, he's trying to decide which drug not to take.

"I've had congestive heart failure," he says, "so giving up one of those prescriptions can really be fatal for me."

For all patients, Medicare covers 75 percent of the first $2,250 worth of drugs. But after that, coverage drops to zero — and doesn't resume until the patient hits $5,100 in expenses. Then Medicare kicks in again, paying 95 percent of costs. But it's this gap — of almost $3,000 — that many sick and disabled seniors call unaffordable.

To highlight the issue, Democrats held a hearing on whom the coverage gap hurts.

"We feel there is something very wrong with the way Medicare Part D is written," says David Madison, who's taking one very expensive cancer drug. He says he reached the "doughnut hole" in a month.

The total cost of his care, he told us, plus the coverage gap is wiping him out.

"It could eventually lead to bankruptcy," he says. "It is catastrophic."

"What we have is absolutely insane," says Sen. Bill Nelson, D-Fla.. He's among the Democrats who wants to fix the "doughnut hole" by allowing Medicare to negotiate the price of drugs. When the benefit was being debated, Republicans refused that approach — calling it government price-setting.

"You wouldn't have to have that 'doughnut hole,' that gap in coverage, if Medicare were allowed to buy its drugs in bulk and therefore negotiate the price down," he says.

Medicare has two suggestions for seniors hoping to avoid the "doughnut hole": Switch to lower-cost generics if possible and you won't hit the hole so fast. Also, this November, you can also switch plans: Choose one that might be more expensive but offers coverage in the coverage gap.

The "doughnut hole" is also emerging as a powerful election issue because of when seniors will feel the pain: Somewhere between 3 million and 7 million seniors will fall into this coverage gap between now and November.