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Shrinking That Donut Hole

March 31, 2010

Yesterday’s newsflash addressed the importance of guarding against health conditions for which treatment most likely to requires prescription medications that far exceed “pre-donut” hole dollars. Although the just-signed health reform bill does have provisions to close the hole, this is a process that will take a full decade, meaning it still makes sense to avoid chronic health condition, for your best financial and physical health. Here’s how the donut hole will shrink over the next 10 years. The plan to fix the donut hole starts with a $250 check from the government to Medicare recipients who fall into the gap this year. Then, starting in January, if you’re caught in the gap, you will get a 50 percent discount on brand name drugs, savings that the government negotiated with drug companies. In 2013, a second type of savings will begin with the government providing subsidies for brand name drugs; the subsidies will start at 2.5 percent and gradually increase to 25 percent by 2020, for a combined 75 percent off brand name drugs from both programs. There is also a government subsidy plan for generics, which begins next year at 7 percent and climbs to 75 percent by 2020. These actions will affect the more than 10 percent of people enrolled in Medicare drug plans who find themselves with thousands of dollars of out-of-pocket costs.