Four years ago, the gap in Medicare Part D prescription coverage, called the “doughnut hole,” left millions of seniors vulnerable to huge out of pocket prescription costs. In 2008, nearly a quarter of all seniors enrolled in Medicare Part D, the program’s prescription plan, encountered this gap in coverage that left them with thousands of dollars in extra expenses.
Now, by contrast, the gap in Medicare prescription coverage is closing. President Obama’s Affordable Care Act—or Obamacare—began saving seniors money on prescriptions immediately upon taking effect in 2010. It will continue to gradually close the gap in prescription coverage until 2020 when the “doughnut hole” will be completely eliminated. As of August 2012, Obamacare had already saved seniors more than $4.1 billion on prescriptions.
The “doughnut hole” was created as a part of the Medicare Modernization Act, which went into effect in 2006. The name comes from the way Medicare Part D covered prescriptions. After first paying a deductible, enrollees had 25 percent co-pays on prescriptions until the costs reached a certain amount. In 2008 this amount was $2700. After that, individuals were responsible for 100 percent of their prescription costs until their expenditures on drugs reached another amount. That was $6,153.75 in 2008. At this point, Medicare would again begin contributing to the costs of prescriptions. On the first of each year, the system reset, and enrollees started over with Medicare covering 75 percent of costs – until they reached the doughnut hole again.
In 2008 more than three million seniors reached the gap in prescription coverage, costing each $4,350 out of pocket before they reached the other side of the “doughnut hole.” To avoid these costs, many seniors simply stopped taking their medications.
Seniors were among the first to benefit from President Obama’s Affordable Care Act because it immediately began closing the Medicare coverage gap. As soon as a person hit the first spending limit, the federal government sent a $250 check to help defray the cost of prescriptions. In addition, in 2011, those covered by Medicare Part D received a 50 percent discount on name brand drugs and a 7 percent discount on cheaper generic drugs. These subsidies will gradually shift until 2020 when Medicare recipients will pay only 25 percent of the cost of all prescriptions.
The seniors who were most likely to be affected by the gap in Medicare prescription coverage were those who were either critically ill or had multiple health problems, the people least likely to be able to afford the extra financial burden left by a hole in their coverage. Now, the Affordable Care Act is ending the policy of leaving seniors to fend for themselves when it comes to their health. Thanks to Obamacare, more seniors can afford their medicines without sacrificing other necessities.