New York Estate Planning & Elder Law Blog
In a rare showing of bipartisanship, Congress finally passed a long term budget to keep the federal government open and fund everything from the military to vital healthcare programs millions of Americans rely upon to survive. Additionally, the new budget included provisions to shore up issues with Medicare that often put seniors in a terrible financial bind when it came time to paying for their prescription medications.
One of the biggest changing coming to Medicare is the so-called “donut hole” in coverage that can leave seniors on the hook for thousands of dollars in out of pocket costs until the program’s catastrophic coverage kicks in. Medicare Part D is a discount on name brand and generic prescription drugs with several phases that is usually not a problem until spending limits hit certain thresholds. Furthermore, drug companies offer certain discounts through the program that help make vital drugs affordable.
During the initial deductible phase, beneficiaries pay all of their drug costs until they reach the deductible, typically a few hundred dollars. After that, beneficiaries enjoy the initial coverage phase where they are responsible for only a 25 percent co-pay until they reach the current $3,700 limit. While this seems like an ample amount of money for some to cover a year’s worth of drugs, many seniors can quickly reach this limit and enter the “donut hole” coverage gap where out of pocket expenses skyrocket to a copay as high as 50 percent.
Fortunately, the Medicare changes in the new budget will gradually lower the co-pays for generic drugs once beneficiaries enter the coverage gap until they reach levels that more seniors can truly afford. By 2020, the “donut hole” copay will only be 25-percent for generic drugs, a substantial change that will help millions of seniors trying to live longer, healthier lives. Furthermore, the spending limit is expected to climb higher and even name brand drugs covered my Medicare Part D will only be subject to the same 25-percent co-pay.
To avoid entering the coverage gap, beneficiaries can purchase additional insurance with prices that will vary depending on the plan purchased. For some, purchasing additional coverage may be a viable option until the “donut hole” is closed in a few years. However, any changes Medicare beneficiaries make should be done under careful consideration and planning with how alterations may impact finances and coverage moving forward.