Making Medicare Stronger: New Savings on Prescription Drugs For Medicare Beneficiaries From the Affordable Care Act

The Affordable Care Act – the health insurance reform legislation passed by Congress and signed into law by the President on March 23 – makes Medicare stronger through new policies that crack down on Medicare fraud and inefficiency, improve and expand Medicare benefits, and extend the life of the Medicare  Trust Fund by 12 years. 

One of the important ways that the new law helps Medicare beneficiaries directly is by taking on the rising cost of prescription drugs and providing important relief for beneficiaries who fall into the coverage gap – also known as the “donut hole.”  Starting with a $250 one-time rebate in 2010, and moving to a 50% discount on brand name drugs for people in the donut hole in 2011, savings for recipients increase in each subsequent year until the donut hole is closed in 2020. 

In addition, Medicare’s use of the new tools provided by the Affordable Care Act and better management of the program have stabilized premiums for Medicare’s coverage of prescription drugs (Part D) and increased the number of prescription drug plans that voluntarily help fill the donut hole.

50% Discount on Brand Name Drugs in 2011

Starting in January 2011, seniors and people with disabilities enrolled in Medicare who fall into the Medicare coverage gap will receive a 50% discount on covered brand name prescription drugs while in the donut hole. 

This builds on the one-time, tax-free $250 rebate that is offered in 2010 to beneficiaries who hit the donut hole.  As of September 21, 2010, 1.2 million Medicare enrollees will have qualified for this rebate and have been sent a check. 

Here’s How It Works

Starting January 2011, if you are a Medicare recipient and have Part D drug coverage, but don’t get the low-income subsidy – also known as Extra Help, and reach the coverage gap, you will receive a 50% discount under the Medicare Coverage Gap Discount on applicable drugs when you purchase them until you reach the out-of-pocket spending limit.  CMS has entered into contracts that will ensure that the brand-name drugs that beneficiaries need will be eligible for this discount.  Savings will continue to increase over the next ten years for all covered drugs in the coverage gap as we close the donut hole.

What It Means For You

• The 50% discount on covered brand-name drugs will reduce Medicare beneficiaries’ out-of-pocket costs by more than $2 billion in 2011.
• Beneficiaries who enter the donut hole in 2011 will save, on average, more than $500 on their covered brand-name prescription drugs
• The average beneficiary in the donut hole will see out-of-pocket costs for drugs in the donut hole fall from approximately $1,250 to approximately $725 in 2011.
  • For example, Lipitor, a cholesterol medication, was the most commonly prescribed brand-name prescription drug in the Part D program in 2006, and beneficiaries buying Lipitor in the coverage gap will save about $45 per month.
• For other, more expensive drugs, the savings will be much greater:
  • If you take Advair, a drug to help control asthma, you will save an average of $100 per month in the donut hole.
  • Similarly, if you take a medication for Alzheimer’s disease called Aricept, you will save an average of $99 per month.
• Many individuals in the donut hole suffer from multiple conditions and take several medications each month.
  • A woman taking popular brand-name medications to treat osteoporosis, prevent blood clots, control her blood pressure, and prevent memory loss could save an average of $258 each month.
  • A man taking common brand-name medications for acid reflux disease, high blood pressure, high cholesterol, and asthma could save an average of $268 each month.

Savings on Generic Drugs

Individuals will also see a savings in the cost of generic prescription drugs.   Medicare beneficiaries out of pocket costs for generic drugs will decrease by more than $65 million and beneficiaries who enter the coverage gap will save more than $15 per year on generic drugs next year.

More Plans Offering Coverage

In addition to savings from the Affordable Care Act’s drug discount program, beneficiaries will save as the percent of both Medicare Advantage and stand-alone prescription drug plans that offer coverage in the donut hole rises.  In 2011, 76 percent of enhanced stand-alone prescription drug plans will provide donut hole “gap” coverage, compared to 39 percent in 2010.  In 2011, 59 percent of enhanced Medicare Advantage drug plans will provide donut hole “gap” coverage, compared to 55 percent in 2010.

While drug costs are falling for Medicare beneficiaries, their premiums are increasing more slowly than projected.  The average prescription drug plan enrollee premium for 2011 will remain similar to 2010, increasing by only $1 to $30 per month.

Posted: September 23, 2010