Back in September I wrote a small piece about the state of Medicare Part D, triggered by HHS Secretary Sebelius’ comments about it. What always frustrated me was that the people complaining so loudly about the so-called “donut hole” didn’t, in my opinion, understand what they were complaining about.
Before Part D was introduced, there were no discounts for prescription drugs for medicare recipients, and as soon as it came out detractors couldn’t stop complaining about the “donut hole.”
The way the Part D prescription benefits were designed made a certain sense – your first few hundred dollars (in 2011 it is $310) of prescription drugs during the year you got no benefit/discount. After you exceeded that amount, the next few thousand dollars (the next $2,530) you paid only 25% of the cost of your prescriptions – the other 75% was paid by Medicare Part D. This threshold ($2840) included the majority of beneficiaries, those with up to $237/month in prescription costs – their total out-of-pocket payments to this point are $632.50 for what used to be a $2,840 expense.
Once your cost of medications exceeds $2840, you will now pay 93% of the cost of generic drugs or 50% of the cost of branded drugs (non-generics), until your total cost of prescriptions adds up to $6,447.50 – when you reach this point you will have paid $3,607.50 out of pocket for your $6,447.50 in benefits, a 44% discount/savings.
Every dollar you spend on prescriptions over $6,447.50 (this level of spending takes you out of the “donut hole”) is subject to a 95% discount.
So, to recap, a patient with prescription drug needs BEFORE the 2011 changes took effect, had secured a nearly 50% discount on their first $6,440 of prescriptions, and any expenses beyond that point were subject to a 95% discount. A patient that needed $26,440 of prescription drugs under the old plan would have paid $5,550 total, an approximate 79% discount.
I fail to see the actual problem, other than that of a possible cash flow problem – the overall benefits speak for themselves. Once you get above $310 in prescription costs, your total savings never dips below 45% of the cost of the drugs, and can work towards a 79% discount for the most expensive cases… The PR issue is that at some point, after you’ve exhausted your 75% discount, and before you reach the 95% discount, you spend few thousand dollars covering the cost of those prescriptions without any discount.
Source: Q1medicare.com website