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Closing the Donut Hole

The Affordable Care Act (ACA) includes important improvements to Medicare prescription drug coverage (Part D) such as reducing expenses for seniors in the donut hole now and eliminating the gap altogether by 2020. Seniors receive additional savings each year on their prescription drugs until the donut hole is closed. The ACA also provides additional assistance for low-income beneficiaries. Since passage of the ACA in 2010, more than 9.4 million people with Medicare have saved over $15billion on prescription drugs.  

Donut Hole

  • The standard Medicare Part D drug benefit contains a "donut hole," a coverage gap where beneficiaries are required to pay the full cost of their medications, even while they continue to pay premiums. In 2016, when Medicare beneficiaries' out-of-pocket drug costs plus the plan’s costs exceed $3,310, they enter this gap. Coverage resumes when costs total $4,850. 

Immediate Help with Drugs Costs in the Donut Hole

  • The ACA helps seniors in the donut hole until it is closed. Copayments required for brand-name and generic drugs are being phased down to the standard 25 percent by 2020. Brand-name drugs discounts from manufacturers increase each year in the coverage gap. Copayments for generic drugs are reduced by seven percentage points each year until the coverage gap is eliminated. 
  • In 2016, seniors receive a 55 percent discount on brand-name prescription drugs and a 42 percent discount on generic drugs, which is applied at the pharmacy. Below are the amounts that beneficiaries will pay for their medications until the donut hole is closed in 2020.
    • 2016: 45 percent for brand-names and 58 percent for generics
    • 2017: 40 percent for brand-names and 51 percent for generics
    • 2018: 35 percent for brand-names and 44 percent for generics
    • 2019: 30 percent for brand-names and 37 percent for generics
    • 2020: 25 percent for brand-names and 25 percent for generics

Assistance for Low-Income Seniors

  • The ACA also improves eligibility and drug coverage for low-income Medicare beneficiaries by:
  • Eliminating copayments for many beneficiaries receiving home- and community-based services who are eligible for both Medicare and Medicaid.
  • Reducing the number of low-income beneficiaries required to change plans each year to maintain zero premiums.
  • Allowing widows and widowers to more easily retain their low-income eligibility.
  • Enhancing outreach programs to ensure that more beneficiaries who are eligible for a Part D Low-Income Subsidy are able to enroll.                             

Government Relations and Policy, June 2016

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