LITTLE ROCK — The law that’s overhauling the U.S. health system will in a decade’s time phase out what is for many a dreaded time of year - the period when Medicare Part D enrollees fall into the so-called doughnut hole, a coverage gap during which they pay the entire price of prescription drugs.
About 4 million of those people will receive rebate checks of $250 this year for costs during the gap. Had the law been in place last year, 43,000 Arkansans would have qualified for the check.
By 2020, enrollees, during what is now the coverage gap, will pay only 25 percent of their drug costs, according to the U.S. Department of Health and Human Services.
The coverage gap works like this:
An enrollee in Part D, which is administered by private firms, pays a monthly premium and then a $310 deductible. After that, he pays 25 percent of his drug costs.
Once he has paid out of pocket expenses of $940, he must pay 100 percent of his drug costs until he has reached a total of $4,550 in out-of-pocket payouts. After that, he is liable only for 5 percent of his drug costs for the rest of the year.
The period during which he pays 100 percent is popularly called the “doughnut hole.”
In 2009 about 174,660 Arkansans reached the cost threshold at which they would have entered the coverage gap. But many low-income people receive subsidies to help pay their costs during the gap. About 43,000 Arkansans, though, received no help with their drug costs in the gap period, according to healthreform.gov, a website of the Health and Human Services Department.
People in that situation will receive the $250 rebate checks. The checks typically will go out within 45 days after an enrollee enters the gap, the Centers for Medicare and Medicaid Services has said.
“[Closing the gap] will give seniors peace of mind that they have some recognition that these drug costs have really been eating up parts of their budgets,” said Nora Super, director of federal government relations for AARP, formerly the American Association of Retired Persons.
A Washington, D.C.-based nonprofit association with 40 million members, AARP says it supported the health overhaul to strengthen Medicare’s viability, boost coverage for preventive services and close the Part D gap.
About 15 percent of people who reached the gap in 2007 stopped taking their drugs, according to a report from the Henry J. Kaiser Family Foundation of Menlo Park, Calif. The nonprofit foundation says it focuses “on the major health-care issues facing the U.S., as well as the U.S. role in global health policy.”
“Obviously, $250 doesn’t begin to meet a lot of these prescription-drug costs that they have, but we consider it to be sort of a down payment to let them know that there’s some help” coming, Super said.
For retired firefighter Jack Ballard of Conway, $250 will cover just two weeks in the gap.
The 66-year-old Ballard, who takes 10 medications daily and one weekly to treat his diabetes, emphysema, arthritis and heart problems, estimates he spent more than $2,000 during the gap last year.
Investments and other income allow the retired firefighter to pay for pricey brand-name drugs such as Plavix, Spiriva and Advair, but “I’m not saying it doesn’t hurt us.” Plavix alone costs him about $165 a month during the gap, and Spiriva around $175.
SHRINKING THE GAP
Medicare and drug companies soon will begin to shrink drug costs in the coverage gap.
The major drug makers, through their trade group, the Pharmaceutical Research and Manufacturers of America, agreed to give a 50 percent discount next year on brand name prescription drugs after participants reach the gap threshold.
For example, a drug with a retail cost of $120 would cost $60. By 2020, other changes would mean that a Part D enrollee would only pay $30 for a $120 drug.
Part D plans will give enrollees a 7 percent discount on generics during the coverage gap.
“For seniors, their out of pocket costs are going to be reduced dramatically,” Super said.
President Barack Obama and other supporters of the health-care law point to the closing of the gap as one of its main accomplishments.
Yet some members of Congress, such as Tom Coburn, R-Okla., have denounced the extra coverage because of the cost to taxpayers.
The gap was devised in the first place to prevent Medicare Part D from exceeding a budget limit attached to the law creating the program, the Kaiser Foundation report noted. And in the next 10 years, closing the gap is expected to cost the U.S. government more than $37.6 billion, according to an estimate from the Congressional Budget Office.
‘MEDICARE IS BROKE’
Coburn said in a February meeting with Obama that “I’m not sure the seniors want us to leave more debt for their children to fill a doughnut hole,” according to a transcript from the White House’s website.
“What we really should be doing is saying, we’re broke, Medicare is broke; we’re working and struggling together to get there. Let’s not add new benefits anywhere,” he later added.
Super said Medicare Part D is different in some ways from many entitlement programs; the premiums paid by retirement-age people increase each year to account for rising drug prices, for example.
Enhanced Part D plans will cover drugs during the gap, but premiums are much higher. The Kaiser Foundation report said the average plan this year with coverage during the gap had $79 premiums per month, while plans with no coverage in the gap were about half as much.
While the changes from the overhaul will help people save on drug costs, they’ve created an opportunity for scam artists.
The Arkansas Attorney General’s Office said last week that it has received no complaints, but AARP said scams have been reported in other states related to the $250 checks.
“Medicare Part D policyholders don’t need to do anything to get the rebate check,” Maria Reynolds-Diaz of the AARP Arkansas chapter office said in a release. She warned of people charging a fee to speed the arrival of the $250 rebate or asking for personal information such as bank account numbers.
Ballard said the checks and next year’s discounts on brand-name drugs will help, but 10 years is a long time to wait out the gap, he said.
For now, he said, he’s fortunate enough to be able to pay for his medication.
Front Section, Pages 1 on 06/20/2010