Opinion: Affordable Care Act saving seniors money, closing ‘donut hole’

Opinion: Affordable Care Act saving seniors money, closing donut hole

By Bob Semro

Prescription drugs are a big part of the monthly budget for many seniors on Medicare, and provisions in the Affordable Care Act (ACA) are working to lower those costs.

In 2011, 3.6 million Medicare recipients nationwide saved $2.1 billion in prescription drug costs, according to estimates released last week by the Department of Health and Human Services (HHS). In Colorado, 39,746 Medicare recipients saved $22.8 million on prescription drugs, or $579 per person on average, according to these estimates.

HHS projects these savings will increase over time totaling nearly $4,200 for the average Medicare recipient by 2020. For those with high prescription drug costs, the savings are projected to be as much as $16,000.

Most of the savings come from closing the coverage gap for prescription drugs, the so-called donut hole.

The ACA requires drug manufacturers to discount brand-name drugs sold to seniors in the donut hole by 50 percent. In addition, it provides increasing subsidies for seniors purchasing those same drugs (2.5 percent in 2013 and increasing to 25 percent in 2020.) That means that by 2020, the donut hole will be closed, and all Medicare recipients will pay the standard 25 percent co-insurance for generic and brand-name drugs.

The Affordable Care Act is already saving money for millions of Americans with Medicare, said HHS Secretary Kathleen Sebelius. As we move forward, we will close the donut hole completely and save even more money for everyone with Medicare.

Here are some facts from the report:

  • In 2012, the ACA provides a 14 percent subsidy for generic drugs to help close the donut hole. By 2020, the subsidy reaches 75 percent.
  • Women especially benefited from the prescription-drug benefit, with 2.05 million women saving $1.2 billion in 2011. In Colorado, 22,102 women saved $12.7 million, or $577 per individual on average.
  • The 7 percent subsidy on generic drugs in 2011 saved $32.1 million for 2.8 million Americans.
  • People with chronic conditions saw substantial savings on drugs that they must purchase regularly, like high blood pressure and high cholesterol medication. Those drugs are essential in preventing far more serious and costly conditions.

An issue brief from the HHS, Medicare Beneficiary Savings and the Affordable Care Act, offers further explanation on efforts to strengthen Medicare and provide stronger benefits to seniors, while slowing cost growth.

Another announcement last week from the department concerned Medicare Advantage, the program that gives seniors the option of enrolling in private insurance instead of the traditional Medicare program. The department reported that Medicare Advantage premiums have fallen by 7 percent and that enrollment has increased by about 10 percent since last year. These real-world results are very different from the predictions of many who opposed the Affordable Care Act and claimed that the new law would significantly damage the Medicare Advantage program.

Contrary to the concerns voiced by many who oppose the new health care reform law, the ACA is already showing real benefits to Americas seniors. And there will be even more significant benefits in the years to come.

Bob Semro is a health policy analyst with the Bell Policy Center, a nonprofit, nonpartisan think tank based in Denver.

Opinions communicated in Solutions represent the view of individual authors, and may not reflect the position of the University of Colorado Denver or the University of Colorado system.