Lowering Costs in the Medicare Doughnut Hole
New health care law shrinks the gap this year
At last, help is here for people who fall into the "doughnut hole" — the hated gap in coverage that is unique to the Medicare Part D prescription drug benefit. Enrollees no longer have to pay the whole cost of their drugs while in the gap because, under the new health care law, it begins to shrink this year. Here's how the new deal works:
Q. How will my drug bills be reduced?
A. You fall into the Part D coverage gap if the total cost of your drugs since the beginning of the year reaches a certain level: $2,840 in 2011. At that point, in previous years, you would have paid 100 percent of the cost of your drugs in the gap, unless you had other coverage. And only when you'd spent a large amount out of pocket since the beginning of the year ($4,550) could you climb out of the gap and qualify for low-cost catastrophic coverage until the end of the year.
But in 2011 you'll spend much less of your own money in the doughnut hole. You get:
- A 50 percent discount on brand-name and biologic drugs, including insulin and vaccines, contributed by their manufacturers.
- A federally subsidized 7 percent discount on generic drugs and Part D-covered supplies used to administer insulin.
Over the next 10 years these discounts will get larger, so that by 2020 you will pay no more than 25 percent of the cost of any Part D-covered drugs in the doughnut hole.
Who gets the discounts?
Anybody who falls into the doughnut hole and is enrolled in a "stand-alone" Part D drug plan (the type mostly used by people in traditional Medicare); those using a Medicare Advantage health plan that provides drug coverage; or those enrolled in any Part D plan sponsored by a current or former employer or union.
Will I qualify for these discounts if I receive Extra Help?
No. People with limited incomes who receive low-cost prescription drug coverage under the government-subsidized Extra Help program already have year-round coverage without a doughnut hole.
How do I get the discounts?
You don't need to apply for them or fill out any paperwork. The discounts will be automatically applied at the pharmacy or, if you get your prescriptions through mail order, by your plan's mail-order service.
Does the discount apply to all Part D drugs?
Under the new law, drug manufacturers must provide the doughnut hole discounts on all their brand-name and biologic drugs if they wish to participate in the Part D program. Medicare officials say that the manufacturers of more than 99 percent of brand-name drugs used by Medicare beneficiaries have agreed to provide the discounts.
But if one of your drugs is made by a manufacturer that declines to participate in the discount program, this means your Part D plan won't cover it at all — not in the initial and catastrophic periods of coverage, not in the doughnut hole, and not in the Extra Help program.
Will it take me longer to get out of the gap?
No. The 50 percent discounts from the manufacturers count toward the out-of-pocket spending limit that gets you out of the gap — even though they didn't come out of your pocket. So if your drug costs are high, you reach catastrophic coverage as quickly as you would have without the discounts.
Example: You fill a 30-day prescription for a brand-name drug while in the doughnut hole. The full price is $102 — $100, plus a $2 dispensing fee. The manufacturer's discount brings the price down to $50. You pay $52. But the whole amount of $102 counts toward getting you out of the gap.
However, the discounts on generic drugs (7 percent in 2011) provided by the government do not count toward the doughnut hole limit.
My plan agreed to pay for a drug it doesn't normally cover. Do I get a gap discount?
Yes. If a plan agrees to cover a drug it doesn't normally cover — usually in response to the patient's doctor's request for an exception to its rules — this drug is considered a covered drug for the purpose of discounts in the doughnut hole, and counts toward the dollar limit that gets you out of the gap.
What if my plan already covers some of my drugs in the gap?
Your plan's coverage is applied first, and the discounts are applied to the remaining amount.
What if I'm enrolled in a state pharmacy assistance program?
You still get the discounts in the doughnut hole. They're applied to the price of your drugs before the state assistance kicks in.
What if I already get help from a drug manufacturer?
Check with the manufacturer's patient assistance program to see if its policy has changed.
How will I know if the proper discounts have been applied?
An explanation will be included in the regular statements you receive from your plan. If you have reason to think that the discounts shown are not correct, call the customer service number shown on your membership card. If you disagree with the plan's explanation, you can use the standard appeals process to resolve the issue. You can also call Medicare at 1-800-633-4227 to file a complaint.
Why is there a doughnut hole anyway?
In designing the 2006 Medicare Part D drug coverage, Congress decided to give comprehensive benefits to people with low incomes (Extra Help) or high drug expenses (catastrophic coverage). It was impossible to cover everybody else comprehensively within the $400 billion that Congress had budgeted for the program.
In order to spread the cost burden, just like any other kind of insurance, the law's drafters had to provide at least some upfront coverage for all. Inventing the doughnut hole solved the problem for the government's budget, but created one for many enrollees' pocketbooks.
Patricia Barry is a senior editor with the AARP Bulletin.
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