Closing Part D hole saved seniors $3.4B

Highlighting a top selling point of President Obama’s health care overhaul, his administration said Monday that seniors have saved $3.4 billion on prescription drugs as the law begins to close the “doughnut hole” in Medicare’s drug coverage scheme.

The savings are the latest evidence that the drug plan, known as Medicare Part D — signed by President George W. Bush and expanded by Mr. Obama — is helping contain costs for the country’s elderly.

But darker financial clouds could lie down the road. The federal government picks up the added cost for drugs, and the price-per-senior is expected to grow faster in the next decade for Part D than for the rest of Medicare, according to the annual Medicare trustees report released last month.

“It obviously rectifies a goofy feature of the prescription drug law, but at the same time it creates a richer benefit, so over time it will be more expensive,” said Bob Moffit, a senior fellow at the Heritage Foundation.

For now, giving seniors more drug benefits is a gold star for the Obama administration, which has been careful to tout the measure along with other popular parts of the health care law in an election-year effort to raise public support for it.

It’s a rare piece of the Affordable Care Act that has been well-received by conservatives, who generally agree that the prescription drug doughnut hole needed to be fixed.

The coverage gap, written into the original law as a way to limit its budget impact, results when a senior’s drug costs hit $2,930. At that point the person must pay for all drugs until the tab reaches $4,700 and the government starts footing the bill again.

But under the health care law, the government must eventually close the gap by offering gradually steeper drug discounts to seniors each year.

In 2010, the administration awarded $250 rebates for every senior who hit the doughnut hole and seniors began receiving 50 percent discounts on name brand drugs and 7 percent coverage of generics last year. The discounts and coverage are scheduled to expand each year until the doughnut hole is virtually eliminated in 2020 and seniors will have access to the same coverage no matter how many drugs they have purchased.

Eager to tout the savings to seniors, administration officials said Monday that in the first three months of the year, more than 220,000 seniors saved an average of $837 on drugs once they hit the doughnut hole.

“The Affordable Care Act is helping millions on Medicare save billions of dollars on care and prescription drugs,” said Marilyn Tavenner, administrator of the Centers for Medicare and Medicaid Services. “The Affordable Care Act gives people on Medicare the relief they need from medical costs and more resources to stay healthy.”

Partially because of a market that hasn’t produced as many breakthrough drugs as expected in recent years, the prescription drug benefit has cost much less than originally thought when Congress passed it in 2003. But drug spending could change in the next decade, with analysts predicting that more new, innovative drugs could enter the market in the next few years.

“It’s something that’s going to draw on public monies, and if it draws more than usual, that’s more strain on government spending,” said Jack Hoadley, a health care policy analyst for Georgetown University.

Much of the cost growth will depend on what types of drugs are approved for distribution, analysts say. Most of the recent breakthroughs have been in the area of cancer drugs, which affect fewer people than a drug to fight Alzheimer’s or high blood pressure would.

“The actuaries are projecting somewhat modest growth in drug costs for the next several years — barring unexpected developments,” said Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities. “A drug to slow the onset of Alzheimer’s, that could drive up costs, but whether that happens or not is beyond our ken.”