Closing the Donut Hole and Other Improvements To Medicare Part D Drug Coverage
The Patient Protection and Affordable Care Act and accompanying health care reform legislation added important improvements to Medicare prescription drug coverage for seniors. The health reform law helps cover expenses for seniors falling into the "donut hole" coverage gap beginning in 2010, and the hole in coverage is eliminated altogether by 2020. The law also provides for additional assistance for low-income beneficiaries.
The Donut Hole: Relief for Seniors Now and Closure by 2020
The original standard Part D drug benefit contained a "donut hole", a gap in coverage where beneficiaries were required to cover the full cost of their medications even while they continued to pay premiums. In 2012, this occurs when the total costs of a beneficiary's prescription drugs reaches $2,930 - requiring the beneficiary to cover the next $1,770 in drug costs.
The new law provides assistance to help seniors bridge this donut hole.
- 50 percent rebate on brand-name drugs in 2012. A 50 percent rebate will be applied at the pharmacy for brand name medications.
- 14 percent rebate on generic drugs in 2012. A 14 percent rebate will be applied at the pharmacy for generic medications.
- Closure of the donut hole by 2020 for brand-name and generic drugs. The co-payments required for brand-name and generic drugs will be phased down to the standard 25 percent by 2020, eliminating the donut hole. For brand-name drugs, manufacturers will increase their discounts each year to negate the coverage gap. Beginning in 2011, co-payments required by Part D law for generic drugs will be reduced by seven percentage points each year until the coverage gap is eliminated for these drugs as well.
- Immediate assistance for seniors. A typical senior that fell into the donut hole saved $250 in 2010, over $600 in 2011, and and will save over $3,000 by 2020.
- Provides catastrophic coverage sooner to protect seniors. The legislation will help seniors get out of the donut hole sooner beginning in 2014. The dollar amount of the catastrophic threshold, where seniors' co-payments are dropped to 5 percent of drug costs, will be more slowly increased from year to year at this point.
Assistance for Low-Income Seniors
The health reform legislation also provides improves eligibility and coverage for low-income Medicare beneficiaries:
- Co-payments are eliminated for many beneficiaries receiving home- and community-based services who are eligible for both Medicare and Medicaid.
- The new law will reduce the number of low-income beneficiaries that are required to change plans each year to maintain zero premiums.
- It allows widows and widowers to more easily retain their low-income eligibility.
- Outreach programs are enhanced to ensure that more beneficiaries who are eligible for a Low-Income Subsidy are able to enroll.
Government Relations and Policy, February 2012