Q: Are there changes in the Medicare Part D prescription drug coverage for 2019?
The Medicare Part D maximum deductible increased again for 2019, to $415, up from $405 in 2018. 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 standard plan designs, 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, or a nominal copay, 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 — that percentage has been declining since 2011, and the donut hole closed one year early, in 2019 instead of 2020, for brand-name drugs.
The initial coverage limit (i.e., where the donut hole begins) is higher in 2019. It was $3,750 in 2018, and increased to $3,820 for 2019. 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 $3,820 in 2019, the enrollee will enter the donut hole.
The upper threshold for the donut hole also increased for 2019, to $5,100 (an increase of $100 from the 2018 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 2019 (although that’s slightly offset by the fact that the upper and lower thresholds for the donut hole increased, as they do each year). You’ll pay 37 percent of the cost of generic drugs in 2019 while in the donut hole. But due to the Bipartisan Budget Act of 2018, enrollees only pay 25 percent of the cost of brand-name drugs while in the donut hole in 2019, instead of the 30 percent that was originally scheduled. This means the donut hole has closed for brand-name drugs, since 25 percent is the amount that enrollees pay before entering the donut hole. Before the ACA began closing the donut hole, enrollees had to pay 100 percent of drug costs while in the donut hole.
For brand-name drugs, even though you only pay 25 percent of the cost, 95 percent of the cost is applied to your out-of-pocket accumulation, helping you get out of the donut hole faster (that 95 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 37 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, there will no longer be a donut hole for generic drugs either — beneficiaries with standard plan designs will simply pay 25 percent of their medication costs until they reach the catastrophic coverage level.
Seniors saved nearly $27 billion on prescriptions, thanks to the ACA
In January 2017, CMS announced that nearly 12 million people have saved more than $2 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 2019. The only legislative changes have been the repeal of the individual mandate penalty and a delay of some of the ACA’s taxes, including the Cadillac tax.
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 drug costs for Medicare beneficiaries, 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.