By Matt Nagy*, Summer Law Clerk to Attorney Tony DelGiorno, Rammelkamp Bradney Law Offices
The Patient Protection and Affordable Care Act (“PPACA”), commonly known as Obamacare, made fundamental changes to many areas of the heath care industry. The most notable of its changes involved health insurance. For example, the PPACA requires most Americans to purchase health insurance by January 1, 2014. This is known as the “individual mandate,” a highly controversial provision of the PPACA which was upheld as constitutional by the Supreme Court in 2012. The PPACA also requires employers of 50 or more full-time employees to offer those employees health insurance, known as the “employer mandate.”
Yet there are many more provisions of the PPACA that have not received as much attention as the individual and employer mandates, and many of these provisions affect seniors in a much more direct way than the above-mentioned mandates. The PPACA does a number of things that are of benefit to seniors, such as: (1) it expands preventative care, (2) it fights against Medicare fraud, and (3) it has improved the general financial outlook of Medicare. But perhaps the most concrete, and celebrated, change the PPACA has brought along is the closing of a long-standing and very frustrating part of Medicare: the “donut hole.”
Many seniors are already familiar with the Medicare donut hole, but here is a basic, plain-English rundown of how the donut hole operated before the PPACA came along. Some people with Medicare choose to pay a monthly premium for certain prescription drug coverage. This coverage is known as “Medicare Part D,” or simply just “Part D.” Say you are an individual covered under Part D. Under Part D, you pay for 100% of the cost of prescription drugs until you hit the deductible amount of $310. At that point, you pay only 25% of the cost of the drugs, and Part D pays the rest. This arrangement continues until the total that both you and Part D pay reaches $2,800. At that point, Part D drops out, and you are responsible for the full cost of your drugs until you have spent $4,550, which is the yearly out-of-pocket spending limit. This gap in coverage is known as the dreaded “donut hole.” Once you hit $4,550, Medicare coverage jumps back in, and you are responsible for only a very small percentage of the cost of your drugs from that point forward.
Not surprisingly, many seniors rely on a wide array of prescription drugs. Factor in that many seniors are on a fixed income, and it becomes incredibly difficult for these seniors to pay out-of-pocket in order to cover the gap in coverage until the $4,550 amount is hit. Medicare offers certain plans that offer donut hole coverage, but these options often come with higher premiums. What are seniors to do? Enter the PPACA. It was signed into law in 2010, and it immediately started making an impact on the donut hole. In 2010, the law allowed for those who entered the Part D donut hole to receive a one-time rebate of $250 to help defray out-of-pocket expenses. In 2011, the law enacted a discount for the price of brand-name drugs in the donut hole and also started to lower the out-of-pocket costs for generic drugs. In 2013, the law continued to lower the out-of-pocket costs of brand-name drugs and generic drugs further. The law’s ultimate aim is a complete closing of the donut hole in 2020, meaning that by that time, there will no longer be a coverage gap, and an individual will only pay 25% of the cost of drugs until the yearly out-of-pocket limit is hit.
Needless to say, this is simply a general overview. The PPACA, in full, covers over 900 pages, and it is truly an impossible task to fully describe each change to the donut hole, in complete detail, in a few neat paragraph. For more information about these changes, or if you have any questions about how the PPACA affects your situation directly, please contact an attorney. For general information, you can visit the following websites:
Mr. Nagy completed his second year of law school at Northern Illinois University and served as a 2013 summer law clerk to the attorneys of Rammelkamp Bradney, P.C. Paralegal Peggy Shepherd contributed to this article. Attorney DelGiorno concentrates his practice in elder law, Medicaid planning, probate, estate planning, and g