For years, senior citizens have lamented the “donut hole” in prescription drug coverage under Medicare, the federal health insurance program for people who are at least 65 years old or disabled.
The Affordable Care Act gradually closes the gap. And many seniors have already taken advantage of millions of dollars in discounts under the new law, with the average New Jersey senior citizen saving $1,052 last year, according to federal data.
With the so-called “donut hole,” Medicare Part D prescription plans used to stop paying once a member’s drug costs reached an annual limit, until their spending reached another threshold and coverage kicked in. The plan now pays a portion of prescription costs, even during the donut hole period, although the coverage gap remains.
This year that gap begins when a patient’s drug costs reach $2,850 and ends when they’ve spent $4,550.
The ACA began gradually closing the gap in 2010. But until the donut hole is closed completely in 2020, it will still result in hundreds or thousands of dollars in annual out-of-pocket costs for seniors with expensive daily drug regimens.
Adelaide Peck of Bayville was shocked when she looked at a pharmacy bill her son brought her in December. The amount she had paid for one drug under her Aetna prescription plan had jumped $75.
Peck, an 84-year-old retired manager for Sears who suffered two strokes several years ago, said the cost of the medicine had nearly doubled from what she was paying before reaching the donut hole.
“I take nine prescriptions every day. It’s a lot of money. That’s why this bill really hit me,” Peck said. “It was scary, when you get the bill and you call up and say, what happened? I got upset.”
“I would have done without the prescription. I would have waited until January, but I didn’t know,” she said. “I don’t even know what the donut hole is. I’d never had it.”
Peck, who relies on Social Security, was not severely affected because she hit the donut hole gap late in the year. But some seniors and disabled people who reach the coverage gap earlier may stop taking their medicine, try to find cheaper substitutes, or cut back on groceries and other basic living expenses.
In some cases, people have been at risk of losing their homes, said Elyse Drucker, a counselor in Union County who helps Medicare beneficiaries with insurance issues.
Drucker described a woman who came to the agency where she works, SAGE Eldercare, shortly before the ACA reforms went into effect. The woman was swamped by the costs of caring for her husband, who had become disabled at an early age.
“She needed to sell her house to pay for drugs,” Drucker said. “She was on the verge of selling her house in 2009 when those changes came in, and it literally saved her house. She had four small kids, and she was spending thousands of dollars a month on medication.”
A Kaiser Family Foundation study found that 19 percent of Medicare enrollees fell into the gap in 2009, particularly those taking expensive drugs for breast cancer and Alzheimer’s. Only 3 percent had high enough spending to get out of the donut hole. Once they are beyond the payment gap threshold, basic Part D plans pay 95 percent of drug costs for the rest of the year.
In 2010 a 10-year process of closing the coverage gap began under the ACA.
As a first step, beneficiaries who fell into the donut hole received rebate checks and pharmaceutical companies began giving them a 50 percent discount on brand-name drugs purchased while they were in the donut hole spending range.
Every year since then, Part D plans have covered a greater portion of the cost of both brand-name medicines and generic drugs.
This year, when they reach the gap, seniors in a basic Medicare Part D plan will pay 47.5 percent of the cost of brand-name prescriptions covered by their plan, and 72 percent for generics, according to the Centers for Medicare and Medicaid Services.
Some higher-premium plans cover greater percentages. While the basic Part D premium is $32 a month, Horizon, First Health, Cigna and United Health Care offer enhanced Part D plans in New Jersey that charge just over $100 a month and partly or completely cover certain drugs for members who have reached the coverage gap.
Next year, the amounts that enrollees pay in the gap will drop to 45 percent for brand-name drugs and 65 percent for generics, and they will continue falling annually. In 2020 the figures will be set at 25 percent, the same percentage members pay for medicine before they reach the donut hole, according to the Centers for Medicare and Medicaid Services.
“The idea with these discounts phasing in is that that donut hole will effectively go away,” said Brian McGuire, associate state director for AARP New Jersey.
In New Jersey, $165 million in discounts helped 156,868 seniors who reached the donut hole last year, according to CMS data. That comes to $1,052 per person, the highest state average. Nationally, $2.9 billion went toward the discounts in 2013.
McGuire said passage of the Affordable Care Act brought sighs of relief from many AARP members. But Drucker said that for many seniors, the gradual, decade-long process of closing the coverage gap is simply too long.
“When I go out and talk to people and I tell them by 2020 the donut hole will be closed, they kind of laugh at me, because, you know, when you’re 80, looking at something that’s 10 years away... They want the help now,” she said. “They just want to hear what's going to help them now.”
To enroll in Medicare Part D, seniors choose from among a variety of plans offered by several insurance companies, with different monthly premiums, deductibles and formularies of covered drugs. The basic premium this year is $32 per month, but individual members may end up paying more or less according to their plan benefits, income and where they live.
A plan finder is available at [https://www.medicare.gov/find-a-plan/questions/home.aspx|Medicare.gov] to help people find plans that cover the medicines they take.
Many “gap” plans have a deductible; costs up to that figure are paid by the member. The maximum deductible is currently $310. After the deductible, members in a standard plan pay 25 percent of drug costs until they reach the donut hole, which in 2014 begins at $2,850.
With a large part of the drug costs covered by insurance, the actual amount an enrollee has paid out-of-pocket upon reaching the donut hole is $945. But that spending figure can quickly soar once an enrollee is in the gap.
AARP offers an [http://doughnuthole.aarp.org|online calculator] that lets users check whether their plan and drug regimen put them at risk of falling into the donut hole. They may also print out a list of less-expensive, alternative medicines to show their doctors.
The spending figure used to calculate proximity to the donut hole includes the member’s out-of-pocket outlays, the deductible, coinsurance and copayments, and the discount – that is, the 52.5 percent for brand-name drugs and the 28 percent for generics that Medicare is covering in 2014. Premiums and spending on drugs not covered by a member’s plan do not count.
Enrollees may also qualify for other assistance. The Medicare Extra Help program helps pay drug-plan costs for people who also have Medicaid or Supplemental Security Income (SSI) or meet income and asset requirements, and it does not have a coverage gap.
New Jersey has a number of programs, including Pharmaceutical Assistance to the Aged and Disabled (PAAD) and Senior Gold, which can help eligible state residents with drug costs.
McGuire noted that, rather than signing up for the original, basic Medicare for hospital and physician coverage, many seniors choose to enroll in Medicare Advantage plans, most of which include some prescription drug coverage.
Under the ACA, Medicare Advantage plans that that include prescriptions must cover at least the Part D minimum percentages, and many offer higher or complete coverage rates for generics, he said.