Anyway, I'll reproduce the way he describes the drug benefit below:
Before we turn to the larger issue, let's look at how the Medicare drug benefit will work over the course of next year.Don't get me wrong, I have much to argue with the prescription drug bill as well. In particular, I don't like the part where Medicare is legally prohibited from having any role in negotiating the price in drugs (and Krugman mentions this), which is basically a gift to the pharmaceuticals industry and also important to explaining the doughnut hole.
At first, the benefit will look like a normal insurance plan, with a deductible and co-payments.
But if your cumulative drug expenses reach $2,250, a very strange thing will happen: you'll suddenly be on your own. The Medicare benefit won't kick in again unless your costs reach $5,100. This gap in coverage has come to be known as the "doughnut hole." ...
One way to see the bizarre effect of this hole is to notice that if you are a retiree and spend $2,000 on drugs next year, Medicare will cover 66 percent of your expenses. But if you spend $5,000 - which means that you're much more likely to need help paying those expenses - Medicare will cover only 30 percent of your bills.
[...] The people who are actually likely to need a lot of help paying their drug expenses were deliberately offered a very poor benefit. According to a report issued along with the final version of the bill, people are prohibited from buying supplemental insurance to cover the doughnut hole to keep beneficiaries from becoming "insensitive to costs" - that is, buying too much medicine because they don't pay the price.
A more likely motive is that Congressional leaders didn't want a drug bill that really worked for middle-class retirees.
Because the doughnut hole can be so easily described in ways that make it seem strange, everybody seems to have fixed on it as though it was some kind of crazed (and, by Krugman's insinuation, deliberate) irrationality. While it's not the way I would designed things, the doughnut hole--and even prohibiting people from buying insurance to fill it--does make sense when you understand that the prescription drug benefit is really two separate benefits stapled together. It's really less an insurance program than a "discount" program for seniors with average drug costs, and then it is an actual "insurance" program for seniors with catastrophic drug costs. Part of the reason the "discount" program is needed is that, so long as you are going to make the program optional, you need to get these relatively healthy people to enroll in it to make the "insurance" part of the program an actual insurance program, as opposed to just something people sign up for when they know they are going to have huge drug expenses.
Anyway, nowhere in his column does Krugman mention that once you get past $5,100, the government picks up 95% of your drug costs. If you are going to say that the program provides a "very poor benefit" for those who need "a lot of help" with their drug costs, it seems dishonest not to mention this. It gets worse, and I don't have time to get into it, but Krugman knows full well that once the government legislated itself out of any capacity to control or negotiate prices, something had to be done to keep the response of drug companies (who, granted, helped a lot in writing the bill) from simply multiplying the price of their drugs in response to the benefit. Drug prices are the problem, not the doughnut hole.