Class Claims Medicare Doughnut Hole Grew
LOS ANGELES (CN) - In a federal class action, Medicare Part D recipients claim the Obama administration let insurers reduce the threshold of the "coverage gap" to make enrollees pay more out of pocket for their prescriptions.
Lead plaintiff Stanley Epstein wants Health and Human Services Secretary Kathleen Sebelius enjoined from implementing the policy known as the Medicare doughnut hole. Epstein claims the policy is "invalid" and was concealed from enrollees.
Congress enacted Part D of the Medicare Act - the Medicare Prescription Drug Program -in 2003. It required the Department of Health and Human Services to expand coverage to include a variety of previously uncovered prescription drugs.
Under Part D, private insurance companies entered into agreements with the department's Centers of Medicare and Medicaid Services to sponsor prescription drug plans for Medicare participants.
The so-called doughnut hole is between the initial coverage stage, in which insurers share the cost of benefits with enrollees, and the catastrophic coverage stage.
When enrollees enter the doughnut hole, they must pay the full cost of their prescription drugs until they reach the catastrophic coverage threshold.
At issue the policy of denying benefits to enrollees who submit what are known as "straddle claims." Insurers process hundreds of thousands, if not millions, of these claims each year, according to Epstein.
"The cost of a drug may fall within the initial coverage stage and the coverage gap for a single transaction," the lawsuit states. "For example, if an enrollee's 2010 cumulative drug costs were $2,820 ($10 below the coverage gap threshold of $2,830) and the enrollee purchased a $20 covered drug, the first $10 falls within the initial coverage stage, but the $10 balance falls within the coverage gap. This is known as a 'straddle claim.'"
Under Sebelius' straddle claim policy, Epstein says, insurers may "manipulate the co-payment scheme in the initial coverage stage, allowing sponsors to evade their obligation to pay their proper share of covered prescription drug costs."
"Such manipulation impermissibly acts to artificially lower the coverage gap threshold."
Epstein claims this "hidden policy" allows insurers to co-insure enrollees' benefits for less than is stated in the insurers' explanation of benefits, and avoid the federally mandated amount for claims that straddle the initial coverage stage and the coverage gap.
In Epstein's case, he says, his insurer Humana in 2010 co-insured the gross sum of his benefits under the program for a total of $2,746.67 rather than the required coverage gap threshold of $2,830.
"Consequently, the coverage gap threshold was impermissibly lowered from $2,830 to $2,746.67. Humana's policy (and that of other sponsors) has deprived, and continues to deprive, enrollees of a portion of their contractual and congressionally mandated Part D benefits while unjustly enriching Humana (and such other sponsors) in violation of its EOB [explanation of benefits] and Part D statutory provisions," the lawsuit states. (Parentheses, but not brackets, in complaint.)
Epstein claims the policy of denying benefits in straddle claims is "procedurally invalid and unenforceable," violates the Administrative Procedure Act, and was hidden from enrollees.
He seeks class certification and retroactive Part D benefit payments backdated to before Sebelius' policy took effect.
Epstein is represented by Eric Benink with Krause, Kalfayan, Benink & Slavens of San Diego.