Health Reform and Medicare Part D

There were several provisions in the recently passed healthcare reform legislation that will affect Medicare laws.  I’ve noted a few that could impact your Part D prescription drug coverage.

2010 - There will be a $250 rebate provided to beneficiaries who reach the Part D coverage gap (also known as the donut hole). 

For those of you lucky enough never to have reached the donut hole, if your total drug costs exceed $2,830 in a calendar year, you must pay the full cost of your prescription drugs until your total out-of-pocket expenses reach $4,550.   This annual out-of-pocket spending amount includes your yearly deductible (if you have one) and your copays.  When you spend more than $4,550 out-of-pocket, the coverage gap ends and your drug plan will pay most of the costs of your covered drugs for the remainder of the year.  At this point you are responsible for a copay of $2.50 for each generic drug and $6.30 for other drugs (or 5%, whichever is higher).  This is known as catastrophic coverage.

2011 - Phased in federal subsidies for generic drugs in the Medicare Part D coverage gap will begin (reducing coinsurance from 100 percent in 2010 to 25 percent by 2020).   Also, pharmaceutical manufacturers will be required to provide a 50 percent discount on brand-name prescriptions filled in the coverage gap (reducing coinsurance from 100 percent in 2010 to 50 percent in 2011).

2013 - Phased in federal subsidies for brand-name drugs in the Part D coverage gap will begin (reducing coinsurance from 100 percent in 2010 to 25 percent in 2020, in addition to the 50 percent manufacturer brand discount).

2014 – Finally, the out-of-pocket amount that qualifies for Part D catastrophic coverage will be reduced (through 2019).

This is very good news for all those who will end up reaching the Medicare Part D donut hole over the next several years.  That’s assuming the legislation does not get changed over time.