First Look: What's Up with Medicare Drug Coverage in 2014

This is the time of year that the Medicare bureaucracy began to inform insurance companies about the rules they must follow for 2014 Medicare health and drug plans. These are the plans announced to seniors in September and October of each year, the plans that seniors and other Medicare beneficiaries enroll or re-enroll in between October 15 and December 7.

It looks like there will not be a lot different in the rules for Part D prescription drug plans in 2014. Again in 2014, as in 2013, seniors affected by the infamous "donut hole" will  receive a 52.5% discount on brand-name drug retail prices. By about 2020, that discount will increase to 75% on brand-name drugs. The current discount on generic drugs is not as high but typically they are not as expensive. And by 2020, it will not matter which types of drugs are involved: beneficiaries will pay 25% of the retail price, the same amount they pay on average before reaching the hole. 

Here's the good news (and it's not new news; it's been true all along). Nationwide, fewer than one in 10 seniors and other Medicare beneficiaries  fall into the donut hole.  Obviously if you are one of the 10 that means you have some serious or chronic illness and this information is of little comfort to you. But, in general. all the publicity about the donut hole is overblown. In particular, no one receiving Social Security Extra Help (about 20% of you) is affected by the donut hole.

Better still if you live in Massachusetts, unless you are very well off (and also unfortunately sick as described above), you are further protected from the donut hole by a program called Prescription Advantage. Couples with income up to around $70,000 in retirement (approximately 90% of you qualify) can get Prescription Advantage.

But it's not all good news:

• Prescription Advantage depends on the state budget which was just passed.  Its rules might change for 2014.
• The federal government controls the entry point and size of the donut hole and the discounts seniors receive in it, but once the insurers have the rules, they begin to build their formularies and negotiate prices with manufacturers and retailers. If the 52.5% discount is calculated against a higher price for your regular prescriptions, price will rise
• In controlling the entry point of the hole, the federal government works off a formula related to the average cost of drugs.  As the prices decline on average (they have, believe it or not), the point at which someone enters the hole can (and most likely will) decline.