Government officials said Thursday that $250 checks have just been mailed to about 300,000 people with Medicare to help them pay for prescription drugs in Part D’s infamous coverage gap—the “doughnut hole.”
This is the second wave of tax-free payments to be sent out, going to those who fell into the gap in April, May or June this year. About 80,000 people who hit the gap during the first quarter of the year received their checks last month. By the end of the year, about 4 million people are expected to receive the one-time rebate.
The $250 rebate program is the first benefit of the new health care law to take effect. It’s an early effort by the Obama administration to convince consumers, especially Medicare beneficiaries, that help is on the way, though the main provisions of the law won’t begin until 2014.
The amount is small compared with most people’s actual expenses in the gap, when they must currently pay full price after the total cost of their drugs since the beginning of the year reaches $2,830. But the rebate is intended to signal that the doughnut hole—the most unpopular aspect of the Part D drug benefit—will eventually be closed.
Next year, people in the gap will see a 50 percent discount on brand-name and biologic drugs and a 7 percent discount on generics. After 2011 the discounts will grow larger until, by 2020, nobody will pay more than 25 percent of the cost of any drugs in what is now the doughnut hole—that is, between reaching the initial coverage limit and qualifying for low-cost catastrophic coverage.
“Seniors and other Medicare recipients in the Medicare donut hole are struggling to afford the medications they need and their basic living expenses,” said Kathleen Sebelius, secretary of Health and Human Resources in a statement yesterday. “Seventy percent of our first round of these $250 rebate checks were cashed within a week of eligible Medicare recipients receiving them; so, we know that folks really need some help.”
If you’re enrolled in the Part D drug program and expect to fall into the doughnut hole this year, Medicare officials say that this is how the program will work for you:
- What do I have to do? Nothing. You don’t have to apply. As soon as you enter the gap, your Part D plan will inform Medicare, and Medicare will automatically cut you a one-time $250 check.
- How will I get it? The check will arrive by mail. The envelope will have “Department of Health and Human Services—Medicare Part D” printed on the outside.
- When will I get it? The first checks went out June 10, the second batch July 8 and the mailings will continue in monthly waves. So if you hit the gap in September, for example, the check should be mailed in October.
- What if it doesn’t arrive? If you’re in the gap and haven’t received your check, wait a month and then call Medicare at 1-800-633-4227. But if you recently changed your address, or are about to move, call Social Security at 1-800-772-1213 to make sure that the correct address is on file.
- Does everybody get a $250 check? Everyone who falls into the doughnut hole gets it—your income isn’t taken into account. People with limited incomes who qualify for low-cost Extra Help don’t get a check because there is no coverage gap in this program.
- What if I don’t spend $250 in the doughnut hole? You qualify for the rebate as soon as you go into the doughnut hole, regardless of how much you spend in it. Even if your actual expense in the gap is as low as $1, you still get $250.
- Is the $250 taxable? No. It’s tax-free.
- Does the $250 add to the amount I must spend to get out of the gap? No. The money in no way affects your ability to qualify for catastrophic coverage or slows down the process for getting there. This year, you must still spend $4,550 out of your own pocket—counting your deductible (if your drug plan has one), all the copayments you spent before hitting the gap, and anything you pay for drugs in the gap—before you can receive low-cost coverage at the catastrophic level, which continues until the end of the year. The one-time rebate just gives you back $250 of that amount in 2010.
- Is this really a free gift or is there some kind of catch? It is a free gift, and there isn’t a catch. But be on your guard against scam artists who try to exploit any uncertainty you feel. Do not believe anybody saying he or she is from “the government” or from “Medicare” and need your Medicare or Social Security ID number or your bank account number so that your check can be credited to you. Or anybody who says you must pay a fee to get the check. This kind of criminal is just trying to cheat you out of your money.
Patricia Barry is a senior editor at the AARP Bulletin.