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Medicare Part D Beneficiaries to Receive Much Needed Relief in 2019 - Here's Why

by Grant Oster, published

Medicare Part D beneficiaries may receive some much-needed relief on the cost of their prescription drugs starting in 2019.

Back in 2010, the Affordable Care Act set a timeline to close the coverage gap. The so-called “Part D Donut Hole” was initially scheduled to close by 2020. But legislation signed this year, through the recently enacted Bipartisan Budget Act of 2018 (BBA), is expected to go into effect in 2019— closing the gap one year early.

The Medicare “Donut Hole,” a nickname for the gap within Medicare Part D, occurs when prescription drug costs exceed a designated amount that varies by year. For example, in 2018 this limit was placed at $3,750.

When this coverage gap is triggered, seniors with Medicare Part D are responsible for paying a certain percentage of their prescription drugs costs covered by their plan. It isn’t until they reach “catastrophic coverage” (which is a $5,000 out-of-pocket limit in 2018) that their portion of prescription drug costs fall significantly down to 5%.

The new congressional policy tweaks how much certain pharmaceutical manufacturers are required to pay for costs for Medicare beneficiaries in the coverage gap. Originally set at 50%, pharmaceutical manufacturers will now be required to cover 70% of the costs of prescription drugs for Medicare Part D beneficiaries who have entered the Donut Hole.

Once in the donut hole, out-of-pocket costs for 2018 are set at 35% for brand-name drugs. Costs in 2019 were originally dropped down to 30% for brand-name prescriptions. However, this has since fallen even further to 25% for Medicare beneficiaries because of the newly updated policy signed by Congress.

Although the term “closing” in reference to the Donut Hole is a little misleading— since seniors with Part D will still have to pay a percentage of their drugs— it’s a significant change from the 35% for brand-name, out-of-pocket costs in 2018.

'Big Pharma' Pushes Back

Not everyone is happy with these changes. Lobbyists for the pharmaceutical industry have come to the forefront, and are pushing to drop the mandatory coverage that falls on pharmaceutical manufacturers.

As influential as they are, "Big Pharma" companies aren’t immune to the ever-changing political landscape in Washington, D.C.

The most recent blow to industry lobbying efforts came September 13, when a key provision impacting its payment obligations under the Medicare program was left out of legislation to fund the Department of Health and Human Services.

The Pharmaceutical Research and Manufacturers of America (PhRMA) is seeking to lower the coverage requirement for pharmaceutical companies from 70% to 64%. The group continues to work diligently to get the provision included to a year-end funding bill in December.

"While these changes closed the donut hole a year early, they went much further by lowering insurers’ payment responsibility to just five percent of costs in the donut hole for brand medications,” PhRMA said in a statement. “This undermines Part D’s market-based structure by reducing insurance plans’ stake in the program and therefore reducing their incentive to manage program costs, while also creating a significant imbalance in payment responsibility.”

In response, the group Patients for Affordable Drugs Now has released an ad attacking the Donut Hole changes and labeled them as “backroom deals” with Congress.

“The drug corporations are pushing for a rollback of good policy in order to pad their profit margins and make the rest of us foot the $4 billion bill,” said David Mitchell, the group’s founder, in a statement. “Both Congress and the public need to know and put a stop to it.”

Inside the Donut Hole

Although key industry players like PhRMA continue to push for policy changes that’ll lower the percentage pharmaceutical manufacturers have to cover for prescription drugs, Medicare beneficiaries can expect to pay less in out-of-pocket expenses than previously paid in 2018 while inside the Donut Hole. Pending the outcome of the year-end funding bill in December, Medicare enrollees should remain diligent on the upcoming changes to Medicare Part D’s Donut Hole coverage gap.

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