According to figures released by the administration, more than 750,000 checks for $250 have already been mailed this summer to Medicare recipients who have exceeded their basic Medicare Part D benefits. The so-called “donut hole” is a gap in prescription drug coverage that will cause beneficiaries to pay the entire cost of their prescription drugs once their basic benefits are exhausted but before catastrophic drug coverage kicks in. Basic Medicare Part D coverage is exhausted when the beneficiary and his or her insurance company have spent a combined total of $2,830 on prescription medications in a single coverage year.
The problematic coverage lapse isn’t a minor issue. An estimated 3 million more checks will be mailed out before the end of the year, as more seniors qualify for the one-time rebate. The $250 check is the administration’s first step toward closing the donut hole altogether, a process that’s expected to take nearly ten years. Beginning next year, the cost of most prescription drugs will be halved for beneficiaries whose basic coverage runs out. Eventually, the gap will be eliminated entirely, and beneficiaries will maintain annual prescription drug benefits with no gaps in the coverage.
As part of the “gap reduction” plan in 2011, Medicare will “streamline” its Part D plans, which may mean fewer Part D plans to choose from. One of the new Part D rules for 2011 limits carriers from offering more than one Part D plan in a single coverage area. Medicare’s goal with the new rules is to reduce the number of confusing choices that confront beneficiaries during the annual enrollment period, but this may force nearly three million seniors enrolled in popular drug plans, such as the multiple Part D options offered by AARP and CVS-Caremark, to switch plans.
The AARP released a study last month that contradicted the Medicare administration claims that reforms will lower the cost of prescription drugs. In the AARP’s study of brand name drug costs, the organization said that in the last five years, the cost of the most popular prescription medications rose by 41.5%, more than tripling the 13.3% rise in the consumer price index for the same time period. Drug makers say that the AARP is being alarmist regarding the price of brand name drugs because about three-fourths of consumers in the US use lower-cost generic drug formulations.