Senior citizens who hit the so-called doughnut hole in Medicare’s drug benefit will begin getting $250 rebate checks in two weeks, the Obama administration announced Thursday — providing one of the first tangible benefits of the recently enacted healthcare law.
The rebates, designed in part to bolster support for the controversial law, are the first steps in a decade-long phase-out of the unpopular gap in Medicare Part D drug coverage.
Seniors now enrolled in a Medicare Part D plan pay 25% of the cost of their prescription drugs until the total bill reaches $2,830. At that point, enrollees must pay the full cost of their prescriptions until their total out-of-pocket spending reaches $4,550. Catastrophic coverage then kicks in and enrollees pay 5% of drug costs for the rest of the year.
Department of Health and Human Services officials said Thursday that the first 80,000 seniors who hit that coverage gap, or “doughnut hole,” will be sent checks on June 10, five days before the deadline.
Checks will then go out monthly until the end of the year as more seniors fall into the gap. Health and Human Services Secretary Kathleen Sebelius said Thursday that the department estimated slightly more than 4 million seniors will ultimately get rebates.
“Seniors do not have to do anything to get this check. They don’t have to sign anything. They don’t have to apply for it,” Sebelius said, warning recipients not to be fooled by scam artists seeking personal information by claiming it is necessary to process rebates.
Starting in 2011, the rebate will be replaced by a discount. Seniors whose expenses fall within the doughnut hole will qualify for a 50% discount on drugs. That will be gradually phased up to a 75% discount in 2020, effectively eliminating the coverage gap.
Thursday’s announcement comes as the Obama administration works to highlight benefits of the new healthcare law in the face of persistent public wariness.
Since President Obama signed the law in March, administration officials have secured commitments from insurance companies to immediately begin offering parents who buy their own insurance the option of including their adult children under 26. Employers who provide coverage may choose to make the option available, but it does not become mandatory until October.
The administration is also working with states to create new high-risk pools this summer to allow people who have been denied coverage because of preexisting medical conditions to get insurance. However, there are questions about whether there is enough money to do this.
The new healthcare law’s biggest changes — including the creation of regulated insurance markets, the requirement that everyone have health insurance, and the ban on insurance companies denying coverage to sick people — do not go into effect until 2014.