Closing the “Donut Hole”

By January 10, 2011Uncategorized

One problem that seniors have long been running into with Medicare Part D is the so-called donut hole.  The donut hole is that portion of Medicare Part D coverage for which seniors must pay 100 percent of the cost of their prescription drugs.  The following figures illustrate the donut hole:

  • When annual prescription costs are between $0 and $310, seniors pay 100% of the total cost out-of-pocket.
  • When annual prescription costs are between $310 and $2,830, seniors pay $310 out-of-pocket plus 25% of the total cost over $310.
  • When annual prescription costs are between $2,830 and $6,640, seniors pay $940 out-of-pocket plus 100% of the total cost over $2,830.  This is the donut hole.
  • When annual prescription costs exceed $6,440, seniors pay $4,550 out-of-pocket plus 5% of the total cost over $6,440.

The healthcare reform bill that President Obama signed into law last March addressed this problem, but by no means did it provide an immediate solution.  Rather, the legislation does not allege to close the donut hole until 2020.  In the meantime, seniors whose prescription drug costs fall into the donut hole will receive a $250 rebate.  While a $250 rebate certainly sounds appealing, it is actually quite insubstantial, considering that a value of $3,610 comprises the donut hole.  This means that in addition to the $940 baseline cost, seniors who fall into the donut hole could be responsible to pay an additional $3,360 out-of-pocket for their prescription drugs.  For seniors who fall into the donut hole, then, the worst-case scenario is that they would be responsible to pay $4,300 out-of-pocket for their prescription drugs.

By 2020, when the healthcare legislation takes full effect, the donut hole will close, such that seniors whose annual prescription drugs costs are between $310 and $2,830 will have to pay $940 out-of-pocket, plus 25% of the total cost over $2,830.  While this is a significant improvement upon the present state of Medicare Part D, seniors could still be responsible to pay thousands of dollars each year for their prescription drugs.

Many seniors want to know if perhaps there is a better alternative.  And for many seniors, the answer is that yes, there is.  Many times seniors with high prescription drug costs are in need of long-term healthcare.  Seniors that qualify for Arizona Medicaid, or ALTCS, can receive additional assistance for covering the cost of prescription drugs.  ALTCS/Medicaid members can enroll for Medicare Part D, and have their premiums and co-pays paid by ALTCS.

Unlike Medicare, however, ALTCS is a needs-based program, meaning that only those who meet specific medical and financial eligibility requirements may obtain ALTCS eligibility.  The good news is that those who are willing to engage in ALTCS planning with an Elder Law firm can arrange their financial affairs to help them qualify for ALTCS/Medicaid.  Working with an Arizona Elder Law attorney can help seniors start down the path to ALTCS eligibility.