Subsidies will close a coverage gap in Medicare Part D.
In 2006, the Medicare Part D drug benefit took effect and, immediately beneficiaries enrolled in Part D plans were required to pay 100 percent of their prescription drug costs after their total spending exceeded an initial amount, up until they qualified for catastrophic coverage from the program.
In 2010, those utilizing Medicare Part D will split the costs incurred at pharmacies with the government 25 percent/75 percent, respectively, up to the first $2,700 in pharmacy spending. (This is after an initial $250 deductible that is solely born by the Medicare Part D recipient). Any spending between $2,700 and $6,154 is paid entirely by the individual. Only after an individual spends $6,154 will the government cover the entire cost of pharmacy-related spending. This coverage “hole” of about $3,400 is expected to grow to more than $6,000 by 2020. In 2007, an estimated 3.4 million Part D enrollees (14 percent of all enrollees) reached the coverage gap.
The health reform law will reduce the amount that Medicare Part D enrollees are required to pay for their prescriptions when they reach the coverage gap, gradually phasing in different levels of subsidies for brand name and generic drugs in the gap beginning in 2011.
- In 2010, Part D enrollees who spend more than $2,700 will receive up to a $250 rebate
- Beginning in 2011, Part D enrollees who reach the coverage gap will receive a 50 percent discount on the total cost of their brand-name drugs in the gap
- Additional subsidies will be phased in for gap coverage of brand-name drugs and generic drugs, reducing the beneficiary coinsurance rate in the gap from 100 percent to 25 percent by 2020
- In addition, between 2014 and 2019, the law will reduce the out-of-pocket amount that qualifies an enrollee for catastrophic coverage, further reducing out-of-pocket costs for those with relatively high prescription drug expenses.
By 2020, all spending up to the catastrophic coverage limit will be split 75 percent paid by Medicare Part D and 25 percent paid by the enrollee. In addition, once the enrollee exceeds the catastrophic coverage limit, the enrollee will only pay 5 percent of the cost of additional spending.
See the Kaiser Family Foundation brief on the Medicare Donut Hole for additional charts and information.
For questions or additional information on the new Medicare Part D changes, email COSE’s advocacy team.