Affordable Care Act Saved Medicare Recipients Billions on Prescription Drugs in 2011
The Obama administration reported that in 2011, the first full year of the new healthcare reform law, 3.6 million people in the Medicare program saved $2.1 billion on prescription drugs. According to Kathleen Sebelius, the Secretary of Health and Human Services, eventually healthcare reform will close the Medicare donut hole completely.
The "donut hole" is the informal name for the Medicare Part D coverage gap. When a Medicare beneficiary has a Part D prescription plan, the beneficiary is responsible for paying an initial deductible. Then, the beneficiary enters the initial coverage phase, where the beneficiary is responsible for paying a co-payment on all prescriptions while their insurance pays the remaining balance. After a Medicare beneficiary surpasses the prescription drug coverage limit for the year, however, the Medicare beneficiary is financially responsible for the entire cost of prescription drugs until the expense reaches the catastrophic coverage threshold. Then, insurance will again cover the primary cost of the prescriptions until the end of the year. This "gap" when the beneficiary must cover the entire cost of prescriptions is known as the "donut hole". These costs can be extremely burdensome on Medicare beneficiaries, which is why the Affordable Care Act's ("ACA") provisions that lower such costs are so appealing to beneficiaries.
According to the Detroit News, the savings on prescription drugs created by healthcare reform had a substantial impact on Michigan Medicare beneficiaries in 2011. More than 84,000 Michigan residents receiving Medicare benefits saved nearly $49 million on prescriptions in 2011. This amounted to an average savings of $582 on prescriptions for each Michigan Medicare beneficiary who hit the donut hole.
This savings is due to certain provisions in the ACA. Beginning in 2011, the ACA provided Medicare recipients a 50% discount on brand-name prescriptions. By 2020, these changes will effectively close the coverage gap and rather than paying 100% of the costs, beneficiaries' responsibility will be 25% of the costs.
