The Affordable Care Act and
the Medicare Donut Hole

 

Until now, consumers who reached the Medicare doughnut hole—the coverage gap in the Medicare Part D prescription drug benefit—have been responsible for paying the full cost of their drugs. But starting next year, these consumers will receive a discount on drugs they purchase while in the gap. This change to Medicare D, is the result of the Affordable Care Act (ACA), which gradually phases out the doughnut hole through the year 2020, when it will be completely eliminated. In 2018, people who enter the gap will receive a 65 percent discount on brand-name drugs and a 56 percent discount on both generic drugs and drugs compounded at the pharmacy. Furthermore, the 65 percent discount will count toward consumers’ out-of-pocket limit, which is used to determine when they get out of the doughnut hole and enter the more generous catastrophic coverage. This means Medicare consumers will spend less while in the doughnut hole. It is important to note that, even though the increase in coverage of generic drugs is much smaller than the discount on brand-name drugs, in many cases, generic drugs may still be less expensive.

Catastrophic Coverage

Once one’s drug costs exceed $5,000 in 2018, they will have reached the catastrophic coverage limit. At that point, you pay significantly lower copays or coinsurance for your covered drugs for the remainder of the year. 

Changes in Drug Availability

Manufacturers of brand-name prescription drugs must sign agreements with Medicare to participate in the Coverage Gap Discount Program. Almost all manufacturers have signed agreements, which means that almost all drugs remain covered by Part D and eligible for the discount. If you are taking a drug that is made by a manufacturer that did not sign an agreement, you should have been notified by your Part D plan by November 30, 2010, that the drug would no longer be covered by Medicare Part D. Your options in this situation are to either switch to a different medication or pay for the drug on your own. However, according to CMS, more than 99 percent of all Medicare beneficiaries will be unaffected by any changes in drug availability.

More Information

-From “Doc Fix and Part D”, Medicare Watch, Volume 1, Issue 37, from The Medicare Rights Center, December 9, 2010 and “Closing the Doughnut Hole Help is Here!”, Families USA, December 20, 2010 .

 

12/10, Rev. 12/18