Q: Were there changes in the Medicare Part D prescription drug coverage for 2018?
A: Yes. The maximum deductible is slightly higher, and beneficiaries’ costs while in the “donut hole” have continued to shrink.
The Medicare Part D maximum deductible increased again for 2018, to $405. This was only a $5 increase, as opposed to the $40 increase that applied in 2017. But many drug plans have no deductible or a deductible that’s lower than the maximum allowed.
The Medicare Part D program was designed with a gap in coverage: prior to the ACA, beneficiaries’ drug expenses (after the deductible) were covered up to a certain dollar amount (on most plans, the beneficiary pays 25 percent of the cost during this phase), then not covered at all up to another amount, and then more robust coverage would kick in (in most cases, the beneficiary would only pay 5 percent of the cost at this point). The gap in the middle is called the donut hole.
The ACA has been steadily closing the donut hole. Instead of having to pay the full cost of medications while in the donut hole, beneficiaries now pay a percentage of the cost — and that percentage has been declining since 2011.
The initial coverage limit (i.e., where the donut hole begins) is higher in 2018. It was $3,310 in 2016, increased to $3,700 in 2017, and has increased again, to $3,750, in 2018. Before this amount is reached (but after the deductible is met), the enrollee pays either copays (fixed dollar amounts) or coinsurance (typically 25 percent of the drug’s cost) for each medication they need – the specifics vary from plan to plan. But it’s the total cost of the drugs (not just the enrollee’s copay or coinsurance) that is counted in terms of determining when the enrollee reaches the initial coverage limit. When the total cost of purchased drugs reaches $3,750 in 2018, the enrollee will enter the donut hole.
The upper threshold for the donut hole also increased in 2018, to $5,000 (an increase of $50 from the 2017 threshold). After your spending has reached this point, you’ll be in the catastrophic coverage range, which means you’ll generally only pay five percent of the plan’s costs for medications.
The percentage you have to pay for brand-name drugs while in the donut hole declined again for 2017. Once your total drug costs (including what the plan pays plus your deductible and copay) reach $3,750, you will pay 35 percent of the plan’s cost for brand-name drugs. For generics, you’ll pay 44 percent of the plan’s costs – down from 51 percent in 2017. These percentages are getting much closer to 25 percent — at which point, there will no longer be a donut hole, since that’s the same as the percentage enrollees pay before the donut hole — and are sharply lower than the 100 percent of costs that enrollees had to pay while in the donut hole before the ACA began reducing enrollees’ costs.
For brand-name drugs, even though you only pay 35 percent of the cost, 85 percent of the cost is applied to your out-of-pocket accumulation, helping you get out of the donut hole faster (that 85 percent includes the portion the enrollee pays, plus the discount that the drug manufacturer provides, but not the portion that the Medicare Part D plan pays). For generics, only the 44 percent that you pay is counted towards your out-of-pocket total, because the rest is paid by the Part D plan. This chart shows how these percentages have been changing since the ACA began closing the donut hole.
By 2020, assuming the ACA’s provisions remain intact, there will no longer be a donut hole – beneficiaries will simply pay 25 percent of their medication costs until they reach the catastrophic coverage level.
Seniors have saved nearly $27 billion on prescriptions since 2010, thanks to the ACA
In January 2017, CMS announced that 11.8 million Medicare beneficiaries had saved $26.8 billion on prescription drugs since 2010, thanks to the ACA’s progress in closing the donut hole. Of that total, $5.65 billion was realized in 2016 alone.
However, as the Wall Street Journal reports, average out-of-pocket costs for each prescription have been increasing steadily over the years, since they’re generally based on a percentage of the cost of the drug, and drug costs have increased sharply. People who need a significant number of prescriptions will eventually hit the catastrophic cap on their Part D plans, and switch to paying minimal costs for additional medications. But for the person who only has minimal prescription needs, out-of-pocket costs could be higher now than they were in prior years.
What happens to the donut hole under the Trump Administration?
Congressional Republicans spent much of 2017 trying to repeal various parts of the ACA. House Republicans passed the American Health Care Act (H.R.1628) in May 2017, but it failed to pass in the Senate and was never enacted. The AHCA didn’t call for eliminated the ACA’s provisions that close the donut hole, but it would have repealed ACA Section 9008, which raises approximately $2.8 billion each year by taxing brand-name pharmaceuticals. So it would have cut one of the sources of funding that was used to expand seniors’ access to prescriptions.
The AHCA didn’t pass, and most of the ACA remains intact as of 2018 (the only legislative changes have been the prospective repeal of the individual mandate penalty — effective in 2019 — and a delay of some of the ACA’s taxes, including the Cadillac tax). We don’t know whether there will be additional changes, although ACA repeal is no longer a primary focus for Republican lawmakers in 2018.
As with everything about the ACA, there is controversy over whether the donut hole should continue to be closed. Some people think the donut hole is a good thing, and that we should go back to the way it was pre-ACA, when seniors paid the full cost of their medications while in the donut hole. Others think that closing the donut hole is an essential goal for healthcare reform.
Your thoughts on this issue might depend on how expensive your medications are, the type of Part D plan you have, and your income level. If you have concerns about the future of the donut hole — and whether it will continue to be closed or not — under the Trump Administration, reach out to your Representative and Senators to ensure that your voice is heard.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.