By Mark Miller
Tribune Media Services
Are you a senior enraged about health care reform? If so, allow me to interrupt the ranting for a moment to alert you that, um, your check may be in the mail.
One of the new-and largely ignored-improvements in the health care reform law that benefits seniors is the closing of the notorious “doughnut hole” in Medicare prescription drug plans. But the changes will occur over a period of years, and there’s been some confusion over the first step-a $250 rebate that is being sent out to most people who fall into the hole this year.
The doughnut hole is the coverage gap that starts when a drug plan beneficiary’s annual out-of-pocket spending hits $2,830. Up to that point, enrollees pay 25 percent of their drug cost; while in the doughnut hole, they pay 100 percent. Coverage starts up again at the catastrophic level, which is $4,550 out of pocket. At that point, Part D beneficiaries pay $2.50 per month for generic drugs, $6.30 per month for brand-name medications or five percent of the medication’s retail cost, whichever is higher.
This year, 94 percent of Medicare prescription drug plan enrollees are in plans that have little or no doughnut hole gap coverage, according to the Henry J. Kaiser Family Foundation-a number that hasn’t changed much since the Medicare drug benefit debuted in 2006. Kaiser estimates that 3.4 million people enter the gap annually, and that many respond by stopping their medications or by skipping doses.
Over time, the Affordable Care Act will close the doughnut hole entirely. In 2011, pharmaceutical companies will provide a discount of 50 percent on brand-name drugs to low- and middle-income beneficiaries who find themselves in the gap. Then, the doughnut hole itself will shrink a bit every year, ultimately disappearing entirely in 2020.
But for starters, doughnut hole victims get a one-time, tax-free $250 rebate check this year. The only exception is low-income participants in Medicare’s “Extra Help” program, which is offered to those with income below $16,245 a year (or $21,855 for married couples). Extra Help’s coverage already exempts its participants from the doughnut hole (See: http://retirementrevised.com/extrahelp).
How will Medicare handle the mechanics of paying out rebates? If you enter the doughnut hole, your Part D insurance carrier will inform Medicare-you don’t need to make any kind of special filing. This is worth mentioning because some states have reported problems with scam operations involving the rebate. Scam artists have been offering to help seniors “file” for their rebates in exchange for a fee, and requesting Social Security numbers and other sensitive personal information. (If you get such a call, report it to your local police, your state Attorney General and by calling Medicare at 1-800-633-4227.)
Expect to receive a check about 45 days after you enter the doughnut hole. If you need to check up on the status of a rebate check, contact your insurance company, or refer to the monthly status report that you receive about your plan. Already, about 25 percent of the 4 million checks expected to be mailed have been sent; the checks are sent to the address on file for you at the Social Security Administration.
If you don’t get a check but believe that you qualify, you can file a complaint with Medicare-but not until at least four months from the date that you enter the doughnut hole.
Medicare beneficiaries can also receive assistance in their local communities from their State Health Insurance Assistance Program (SHIP). Local SHIP contact information can be found on the back of the Medicare and You 2010 handbook or online at http://bit.ly/bIG1Hw.
A free Medicare brochure explaining the rebate procedure is available at http://bit.ly/aLrAZR. If you’re still having problems, contact your local State Health Insurance Assistance Program (SHIP), which provides free Medicare counseling. You can find a list of local SHIPS at http://bit.ly/8NtGXI.
While we’re on the subject: Many seniors have written to me expressing worry about Medicare Advantage, the privatized PPO option in Medicare. The health reform law reduces federal reimbursement rates to Advantage plans over time; some enrollees worry that this will translate into big premium increases to enrollees, big reductions in benefits or both.
But Medicare Advantage rates are expected to be one percent lower next year compared with 2010, according to the Centers for Medicare and Medicaid Services (CMS). That comes on the heels of a whopping 15 percent increase this year, before health reform passed. The slight decline results from more aggressive negotiation by CMS with insurance companies.
Benefit cuts remain a possibility, but the dip in premiums for next year suggests that the private insurance companies offering plans remain committed to competing vigorously for the lucrative Advantage market, which suggests benefit offerings will have to stay strong, too.
Mark Miller is the author of “The Hard Times Guide to Retirement Security.” He publishes http://retirementrevised.com, recently named the best retirement planning site on the web by Money Magazine. Contact him with questions and comments at mark@retirementrevised.com
This article was originally printed in the October 23, 2010 – November 6, 2010.
