The good news is that the Centers for Medicare & Medicaid has announced that based on their review of the Part D drug plans proposed “bids” for 2011, that the monthly premiums that beneficiaries will have to pay will rise only by about $1 a month. And while it won’t be until next month that the specifics on what plans will be available, what their formularies will be, and what their premium and benefit structure will be, we now know what the Part D benefit will look like in 2011. And while much of the structure (and even the dollar amounts associated with it) will look very much like 2010’s, the Health Care Reform legislation has radically changed one “band” of the benefit – the 100% coinsurance band where the beneficiary pays all of the cost of their drugs, also known as “the donut hole.” It is being partly plugged in a way which will delight beneficiaries who ever have fallen into it. Here is the 2011 structure:
Recommended Part D Benefit Structure for 2011
Annual Deductible Band (from $0 to $310) The beneficiary pays $310.00 and Medicare, nothing. Many plans have no or a lower deductible
25% Coinsurance Band (from the deductible to $2,240 add’l) The beneficiary pays $632.50 (25%) and Medicare pays $1,897.50 (75%) of the next $2,240.
Total Spending to this point is $2,840.00, of which the beneficiary has paid $942.50 and Medicare, $1,897.50. This $2,840 is called the "initial coverage limit”
Donut Hole – the beneficiary is responsible for an additional $3,607.50, while the Medicare responsibility varies.
At this point, the beneficiary goes into the “donut hole,” but it is very different from 2010 and previous years. Once a total of $2,840 has been spent on drugs, Health Care Reform legislation provides that:
For brand name drugs, the manufacturer has to give a discount of 50% off the price of the drug itself, and the beneficiary has to pay the remaining 50%, plus any dispensing fee.
For generic drugs, the government will pay 7 percent of the cost of the drug itself. The beneficiary pays the other 93 percent, plus the dispensing fee.
The beneficiary will remain in the donut hole until all their drug expenses total $4,550. This includes their deductible, anything they spent in the 25% coinsurance band and in the donut hole, plus whatever the dollar amount of the discounts that drug manufacturers had to give them on brand name drugs while they were in the donut hole. (But not the amount the government paid for generics in the donut hole.)
While it will be different for every beneficiary, it is likely that a beneficiary will actually have to spend perhaps $1,900 or $2,000 out-of-pocket while in the donut hole to get out of it, as the 50% manufacturers' discount will count toward their spending.
And once the beneficiary has reached their $4,550 drug expense total (this is called the "out-of-pocket threshold") the beneficiary goes into the:
Catastrophic Band and is responsible for 5% of their drug costs, and Medicare, 95%.
That is, in the catastrophic band, the beneficiary will be responsible for 5% for the total cost of each drug they receive, and Medicare, 95%, without any upper limit to the total spending on their drugs. In addition, the minimum amount a beneficiary must pay in catastrophic phase remains the same as 2010: $2.50 for generics and $6.30for brand name drugs.
And you may note that the deductible and the “out-of-pocket” threshold are the same as they were in 2010, and the initial coverage limit is only $10 more. Finally, the "base beneficiary premium" will be $32.34 in 2011 (compared to $31.94 in 2010); this means that the monthly penalty amount will stay at $0.32. That is, you will have to pay a penalty of 32 cents for each month you were not in Part D that you could have been.
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