Donut hole closes

May 1, 2010

PPACA promises to eventually close the coverage gap for seniors.

ONE OF THE MAIN attractions of the reform legislation is its scheme to eliminate the contentious coverage gap in Medicare Part D, which imposes out-of-pocket costs on seniors with high drug bills.

Currently, Medicare beneficiaries who spend more than $2,830 on medicines hit the donut hole in which they pay the full cost of prescriptions. After drug outlays exceed $6,440, the government covers 95% of additional catastrophic costs. The reform law lays out a plan to close the gap over 10 years with much of the cost shouldered by pharmaceutical companies.

To provide some immediate relief, the government is giving a $250 rebate to beneficiaries who fall into the donut hole this year. Beginning next January, manufacturers will cover 50% of the cost of brand medicines filled by seniors in the gap.

At that point, policy makers consider the donut hole essentially closed because the remaining of 25% copays will be in line with beneficiary fees on drugs prior to hitting the coverage gap.

Closing the hole will cost more than $60 billion over 10 years, but it eliminates a major source of confusion and hardship for elderly patients and is expected to boost compliance with prescribed therapy. The lower cost to beneficiaries, moreover, will move seniors through the donut hole more quickly to catastrophic coverage.

-Jill Wechsler