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The Medicare Donut Hole

27 Dec 2016Health Essays


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Medicare Part D is a prescription drug benefit program that was created through the U.S. Medicare Prescription Drug, Improvement, and Modernization Act of 2003. The program started providing coverage for users on Jan 1, 2006. By October 2006, the US government Bush hinted at trying to roll in Medicare associated with Social Security, in a new push of reform. It is perceived that good progress has been made in this area, but issues of mandatory spending have arisen. This is an important entitlement program for senior citizens because when these senior citizens retire, they are entitled to a benefit, such as in Social Security.

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The donut hole, which is the coverage gap that was designed by Congress to make the Medicare Part D program less expensive for senior citizens, refers to the cutoff in Medicare drug coverage, which occurs when the total drug costs of a participant reach $2,250. If these costs eventually increase to more than $5,100, then the coverage picks up again. the Medicare system been stretched to its limits ever since it was started under President Johnson in the 1960’s’s. this has been more so in recent years, as about 77 million baby boomers started to come of age and enter the Medicare system. A major source of worry in the system is the increasing cost of prescription drug coverage, which is presently being covered by Medicare Part D. Thus, the donut hole has generated quite a lot of debate in the Medicare and pharmaceutical industry, on Capitol Hill, and in retirement circles all over the US.

Purpose statement

The cost of medication should always be taken into consideration when healthcare professionals are dealing with patients that may not be able to afford certain medications. When Medicare Part D went into effect in January 1, 2006, it put many senior citizens nation wide in a financial dilemma. When providing healthcare to patients it is important to ensure that they stay compliant with their healthcare regiment. In this particular situation, many senior citizens cannot afford the medications that they are on and therefore they are not complying with their medication regiments. There have also been warning signs that some senior citizens who depend on the Medicare prescription drug benefit might find it to be less helpful in the near future. Families USA reports that its analysis shows that “changes to the plan will affect seniors in the doughnut hole"

Research problem

Medicare Part D affects the healthcare of senior citizens because most of them cannot afford to pay completely for the medications that they have been placed on, thereby making it difficult for these senior citizens to comply with their medication regiments. The Medicare donut hole was initiated to reduce the cost of healthcare programs, but it seems that it has served to enable this program to apply to everybody, which in turn, requires the donut hole in order to prevent a sharp increase of the cost.

Some believe that the whole program is completely phony, and that the pharmaceutical industry benefits much more than anyone else, and that the pharmaceutical industry actually reduces the prescription drug benefit for many senior citizens.

The doughnut hole is a major issue in the Medicare Part D debate. Beneficiaries of this coverage receive premiums that amount to $420 yearly.

After a $250 deductible, coverage takes effect to compensate for prescriptions expenses between $250 and $2,400. Based on new legislation in 2007, beneficiaries bear 100% of prescription costs between $2,400 and $3,850, which was reduced from a doughnut hole between $2,250 and $5,100 in 2006. Part D then covers any costs in excess of $5,100 in a given year2. An estimated 3 million to 4 million beneficiaries fell into this coverage gap in 2006. Lobo, T. J. (2007).

The doughnut hole was designed by the Republicans as a means to create a more affordable prescription drug coverage plan in the Medicare Part D plan. According to Robert Laszewski, a nonpartisan health policy consultant in Washington, “Part D is there because it's the kind of plan design the Congress could afford. Along with affordability, Congress saw the doughnut hole as an instrument to create more efficient prescription practices, and this was a major shortcoming of its predecessor program, Part B.” Lobo, T. J. (2007).

Senior citizens who have an already existing drug benefit plan (for example, from ex-employers), discover that they have no other option but to use this Big Pharm plan of the Republicans instead, and some find that it is not as good as their preexisting program. This is because the program costs them a lot of money, which they wouldn’t have had to pay if the welfare plan had not passed.

According one report, by next year, there will be no drug plans that offer coverage for the top medicines prescribed to senior citizens in the donut hole, in 13 states. Last year, only 4 states did not participate in this coverage, but it is excepted that the number of senior citizens without access to donut hole coverage will increase 18-fold from 375,000 to 6.6 million this year alone.

In the 37 states and the District of Columbia in which plans will continue to offer such donut hole coverage, the report says premiums for the lowest-priced Part D plans will increase by 87.4 percent, jumping from a median monthly price of $55.08 in 2006 to $103.20 in 2007 - an increase in annual premiums from $660.96 to $1,238.40.

This report contradicts the Bush administration's claims that in 2007 "there will be more plans with coverage in the (doughnut hole) gap." According to the report, the four states (Alaska, Hawaii, Maine, and New Hampshire) that did not have plans with meaningful doughnut hole coverage in 2006 will be joined by nine additional states (Connecticut, Florida, Massachusetts, Michigan, New York, North Carolina, Rhode Island, Vermont, and Wisconsin) in 2007.

In 2006, the doughnut hole coverage gap begins once a senior has $2,250 in drug costs. “When a senior reaches that threshold, the senior has no coverage until his or her drug costs reach $5,100-a gap of $2,850. In 2007, the gap will increase to $3,051, and it is projected to grow to $5,066 in 2013. While in this coverage gap, seniors continue to pay Part D premiums.”

This coverage gap never made sense, and now it is getting worse for seniors who take multiple prescription drugs."

In seven upper Midwestern and Mountain-West states (Iowa, Minnesota, Montana, Nebraska, North Dakota, South Dakota, and Wyoming) that will still have Part D plans that provide doughnut hole coverage for the most commonly prescribed drugs, premiums for the lowest- priced plans will increase by 185 percent, from $38.70 per month to $110.30 per month-annual cost increases from $464.40 to $1,323.60

Beyond the premium hikes in those seven states, the report says that “seniors will face steep premium increases in the following states: New Jersey (179.8 percent), Missouri (111.8 percent), Delaware (95.2 percent), the District of Columbia (95.2 percent), Maryland (95.2 percent), Kansas (88.7 percent), Alabama (84.3 percent), and Tennessee (84.3 percent).”

It is expected that about half of the Part D beneficiaries who enter the Donut Hole this year will do so in late July or early August. According to the National Insurance Markets, Inc. who looked at the statistics for 2006,

This year Part D enrollees will enter the Donut Hole when they have spent $2,400, out of pocket, for prescription medications. Enrollees will be in this gap, during which they pay 100% of their medicine costs until they have spent another $3,051 at which point they will have Catastrophic Coverage that will cover 95% of their drug costs. (National Insurance Markets, Inc.)

Conclusion of findings

Since it has been predicted that the donut hole will be linked to changes in social security benefits and other aspects of Medicare, it can be expected that more than 3 million Americans will be entering the Donut Hole in 2007. Some Part D plans, typically those with higher premiums, actually do offer Donut Hole coverage. However, as the Kaiser report states, 11 states have no plans that cover both brand name and generic drugs while patients are in the Donut Hole, in 2007. Also, in 2007, coverage of drug plans in the donut hole will be a lot scarcer and, in some states where such coverage programs continue to be made available, beneficiaries will find probably it to be a lot more expensive.


Lobo, T. J. (2007). MEDICARE PART D: THE DOUGHNUT HOLE EFFECT IndianaUniversity – Kelley School of Business. February 9, 2007


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