Now, thanks to the new health care reform law pushed into law by President Barack Obama, that “donut hole” has gotten a lot smaller.
Here are the basics: Before President Obama signed health care reform, Medicare beneficiaries first paid a deductible of $310 for prescription drugs. Then Medicare pays 75 percent of charges up to $2,830. After that, coverage would stop cold until all of a senior’s out of pocket spending totalled $4,550. For those who reached this level of cost, which the government calls catastrophic, Medicare picked up again and covers 95 percent of the beneficiary’s drug bills.
The new health care reform law fills in the hole gradually between now and 2020. This year only, Medicare will send about 4 million people who reach the donut threshold a one-time rebate check of $250.
According to Peter Ashkenaz, a spokesperson for the federal Centers for Medicare and Medicaid Services, seniors will receive their checks about a month after they reach the donut hole.
Next year, Ashkenaz explained Medicare patients will receive a 50 percent discount on brand name drugs and a 7 percent discount on generic brands. “If people need more, they could qualify for extra help and should talk to their state health insurance program and Social Security office to apply for extra help,” he said. The hole will be gradually filled a bit more each year after until it is completely closed over the course of the decade.
Medicare beneficiaries will receive a monthly mailing from Medicare showing how far along they are in spending.
A looming problem, Ashkenaz added, is that seniors need to be wary of scams. For instance, criminals have called seniors to say they are from Medicare and only need your Social Security number and bank information to deposit the $250 in your account.
“If somebody calls you and says they are from Medicare, it is a scam,” Ashkenaz stated. “The check comes directly to your home. There is no direct deposit. You do not need to do anything. All you need to do is have spent $2,830 and you’ll get a check. If you do get any calls or think you are being scammed. Call 1-800-MediCare and report it. The bottom line is do not provide any personal information.”
Finally, Ashkenaz said, there is a group of about four million seniors who will never see the $250 check.
“If they qualify for the low-income subsidy drug program” and are eligible for both Medicare and Medicaid. These “dual eligible” individuals can apply to have the donut hole plus their copays and deductibles paid by the program, he said.
Why The Donut Hole?
Why did Washington dig consumers with extensive medical needs into a hole in the first place? When Congress passed prescription drug coverage under Medicare Part D in 2003, it ended the years during which the United States was the only advanced economy that did not cover prescription drugs as part of its national health plan (with the exception of hospital patients).
However, Congress struggled to keep overall program costs below amounts considered too expensive to be politically pleasing. The Republican-led Congress worked with conservative Democrats and the drug lobby, while liberal members of Congress were literally locked out of the room,
With backing from AARP in 2003, Congress agreed to certain provisions guaranteed to inflate the cost of the program. For example, the legislation prohibited Medicare, unlike the Veterans Administration, from negotiating drug prices with pharmaceutical companies to keep rising costs in check.
Overall, the Department of Health and Human Services projects that prescription drug costs will almost double between 2008 and 2019 to $457.8 billion, rising well above average U.S. inflation.
Another financial black hole resulted when Congress refused to allow Americans on Medicare to order the same drugs at lower costs from other countries, especially Canada, despite no evidence that those pharmaceuticals were any less safe than those sold in the United States.
Congress also compelled beneficiaries, with some exceptions, to buy separate insurance policies only for drug coverage, instead of handling claims through standard Medicare plans.
Without cost controls on drug-price inflation in the United States, Congress decided it had to keep a lid on the overall price tag for the new prescription-drug entitlement. One way was simply to cap the amount of the bill—by not paying for drugs beyond a certain level. And that’s what Congress did.
Political movers and shakers could not easily deny coverage to very sick people, so they agreed that Medicare should pay for medicine beyond amounts they said would be financially catastrophic for people. So instead of simply stopping coverage at a certain point, they ceased drug reimbursements at a midpoint and agreed to pick up spending again when people reach devastating amounts – amounts attained by a relatively small percentage of Medicare beneficiaries.
Why start and stop the donut hole where they did? Political leaders looked at the dollars they felt they could get passed and pulled money out of the middle until the bill’s price tag dipped below the cost line they set. The well being of vulnerable Medicare beneficiaries, who would, they felt, get a new benefit, was not a consideration.
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