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The Medicare donut hole is a gap in coverage for prescription drugs under the Part D portion of Medicare, according to this site. Its name derives from the shape that it takes on when seen on a graph of out-of-pocket costs to beneficiaries.
The donut hole begins after $2,930 worth of total drug spending has been incurred by an individual or couple and ends at the point where they have spent $4,700.
There are no more government subsidies for their prescriptions, hence the name “donut hole,” because once you fall into it, you may as well keep going since there is nothing left to stop your fall. The amount that individuals pay over and above the donut hole is called the “donut-hole” discount.
What is the history of the Part D drug coverage gap?
The initial plan for Part D included no coverage for prescription drugs. This was changed due to pressure from several groups, including AARP (American Association of Retired Persons). The program covers only those aged sixty-five or older and those between 65 and 69 who have certain disabilities.
Health insurance companies were allowed to contribute funds toward closing this gap but are not required to do so; hence it will take them a few years before they can cover individuals at full price when they enter this gap. In addition to reducing costs for beneficiaries by 50%, plans to perform this task also receive a subsidy from the government.
What are the possible drawbacks of this coverage gap?
The main drawback is that it puts individuals who use prescription drugs at risk for financial hardship, which could lead them to defer needed prescriptions or switch to less effective ones to afford them. They could be at a higher risk for medical catastrophe if their medical conditions worsen, and they must seek out more expensive treatments as well.
Since the exact total amount an individual will pay during their time in the donut hole usually cannot be determined beforehand, there is always some level of uncertainty surrounding what that final price will be. This has led to criticism from consumer groups about how difficult it is for beneficiaries to make purchasing decisions when they don’t know how much their drugs will cost.
What steps have been taken to try to mitigate the impact of this coverage gap?
Under legislation passed in 2007 and amended in 2009 and 2010, the “donut hole” will be reduced on a sliding scale until it closes completely by 2020. The law also includes changes that make drug coverage more generous for beneficiaries with high prescription costs. Changes made by the Affordable Care Act (ACA) signed into law on March 23, 2010, including providing greater discounts within the donut hole.
According to a Kaiser Family Foundation study of November 2012: “Beneficiaries are now protected from catastrophic expenses after falling into the Donut Hole—the point during which beneficiaries pay 25% towards their drug bills….” However, they continue: “Under current law, once people enter the Donut Hole in 2017, they will receive no more discounts on brand-name drugs for the rest of the year, until they reach $3.40 [sic] out-of-pocket (which is still a big discount off the list price).”
What other criticisms have been leveled at this coverage gap?
From 2008 to 2010, prescription drug spending climbed faster than any other type of health care service. This increased cost led critics to question why beneficiaries should be required to enter this gap before receiving their full benefits packages.
In addition, as stated earlier, it can lead many individuals who need medications or treatments that are not available through less expensive generic alternatives into financial trouble because they must seek out more expensive treatments to get them. This can lead to high costs for individuals who enter the donut hole, which could be financial hardships for some people.
Critics have also pointed out that this gap punishes beneficiaries who require specific medications by forcing them to pay a higher proportion of their medication costs during this time and, thus, may force them to choose less effective ones or fewer doses if they cannot afford more costly ones. Therefore, efforts such as (MSPs) are needed in order to help alleviate the impact of this gap on individuals’ medical care.
What are other criticisms?
Some critics contend that Congress used political pressure and special deals with certain groups, including some pharmaceutical companies who had been accused of overcharging the government for drugs, of securing a bill that would create this gap. Critics contend that it was created simply because some powerful groups wanted to cut Medicare costs without actually reducing how much they were spending on medications; this led them to trade cost cuts in other areas for greater coverage of prescription drug costs within Part D and thus avoid any possible political backlash from these groups.
What are drug savings programs?
There are several different types of drug savings programs offered by both private and public organizations. The program with which most beneficiaries will be familiar is the “Part D Low-Income Subsidy” (LIS) Plan Enrollee Assistance Program (PEAP), which covers enrollees who have low incomes and whose total drug costs (including co-pays and coinsurance, but before the donut hole coverage limit) are higher than a federally mandated threshold.
This program has its eligibility criteria; for example, to be eligible for LIS/PEAP assistance, the beneficiary’s total Part D plan premium plus their deductible or initial coverage limit must not exceed $1741. While this PEAP subsidy is available to families of all income levels, beneficiaries with incomes up to 150% of poverty are also entitled to enroll in other types of programs that offer additional financial assistance. These include “Part D Sponsor Low-Income Subsidy” plans offered by private insurers, low-income government insurance programs such as Medicaid and CH, and other government-sponsored programs.
These plans all offer additional financial assistance to individuals with low or very low incomes to reduce the burden of their monthly drug costs and thus provide them greater access to needed medications. In addition, more expanded coverage has been provided for low-income seniors through the (MA-PD) since 2006; these plans have also been required by law to participate in the LIS/PEAP program.