Some Medicare Part D drug plans have a coverage gap many refer to as the “donut hole.” It’s more like a scary, black hole, causing so many seniors much financial distress.
“Thanks to the Affordable Care Act, which had a rocky launch last week, Ohio Medicare beneficiaries will see that gap shrink again in 2014 and in each year until 2020, according to Medicare.gov.”The Wall Street Journal reported.
What exactly is the donut hole? First, understand that not all Part D beneficiaries even reach the donut hole. It starts when beneficiaries & their drug plan have spent the set amount for prescription drugs for the year. When that amount is met they are in the donut hole. During this time all drug costs are paid out-of-pocket until the set out-of pocket limit is reached. Yearly deductibles, coinsurance or copayments, and what is paid in the coverage gap all count toward this out-of-pocket limit. The limit doesn’t include the drug plan’s premium.
Before the Affordable Care Act or “Obamacare” in 2010, beneficiaries had a yearly spending limit of $4,550. Currently the spending limit is down to $2,970 with an out-of pocket limit of $4,750. Beginning in January, 2014 the spending limit lowers to $2,850 and the total out-of-pocket limit will also lower to $4,550.
Thanks to Obamacare, the out-of pocket costs beneficiaries must pay while in the donut hole are discounted. Currently, beneficiaries are responsible for 47.5% of the negotiated price of brand-name drugs and this will remain the same through 2014. There will, however be a greater discount for generic drugs, bringing beneficiary responsibility down from 79% to 72%. Each year as these spending limits decrease the discounts will increase. By 2020, Obamacare will declare the doughnut hole closed and beneficiaries will be paying a low 25% of the costs of their covered prescription drugs.