JONATHAN COHN DECEMBER 6, 2011
Imagine that 2.65 million senior citizens just saved a few hundred dollars each on their prescription drug costs, thanks to a new government program. And imagine that it’s not just any seniors: It’s seniors with serious medical conditions and who need financial protection the most.
Isn’t that worth noting? Shouldn’t the law, and its sponsors, get some credit for that? Yes. And yes.
Under the terms of the Affordable Care Act – yes, Obamacare – pharmaceutical companies provide a 50 percent discount on name-brand drugs for seniors who hit the "donut hole." The donut hole is the gap in coverage that begins once a individual Medicare beneficiary has purchased $2,840 in drugs over the course of a year. At that point, the beneficiary becomes completely responsible for prescription costs – in other words, he or she has to pay for them out of his pocket – until he or she has spent another $3,600.
It may not sound like a lot of money. But the seniors who hit the donut hole are, by definition, the ones with the most medical problems. Saving a few hundred dollars, on average, makes a real difference. And that's precisely what's happening, according to data the administration released today. According to its calculations, 2.65 million seniors hit the donut hole -- and then saved an average of $569 each. The data runs through October. More seniors will hit the donut hole through year's end, so the total number of beneficiaries who take advantage of the discount in 2012 should end up higher.
The new figures effectively confirm an estimate that Ricardo Alonso-Zaldivar, of the Associated Press, reported a week ago – based on calculations the official Medicare Actuary had performed at his request. Those calculations suggested that, in effect, the new discounts had shrunk the donut hole by half. His story didn’t get nearly enough attention (including from me!) but today’s announcement might. USA Today has already run a story on it.
The discount was part of the infamous deal that the Obama Administration and its allies cut with the pharmaceuticals industry. And there was plenty about that deal not to like: The drug makers got off way too easy. But this was one place the industry did give a little. And while I'm not always in favor of lower cost-sharing, the donut hole itself never made much sense.
By the way, the lower drug costs aren’t the only Medicare news of the day – or even, perhaps, the most important. The administration also announced that 24 million seniors had gotten free preventative care, another provision the Affordable Care Act’s sponsors had secured. Whether or not greater use of preventative care amounts to lower health care costs, it should amount to healthier seniors. As Matt Yglesias notes, that’s worth celebrating for its own sake.
The irony here is that the beneficiaries of these changes, senior citizens, have been among the most skeptical of the law, partly because they feared it would weaken Medicare. Maybe these changes will make them reconsider.