The Obama re-election campaign is pumping out propaganda about the Medicare 'donut hole' closing in 2020. It's part of an apparent attempt to scare us seniors into voting for the president, or at least an attempt to confuse us seniors. Elderly women are being attacked specifically by the Democrats.
To be accurate (not something you're going to see too much of from any politician for the next eight months, if ever), the 'donut hole' doesn't close in 2020. But the discounts from drug manufacturers -- which began in 2011 under the 2010 Patient Protection and Affordable Care Act -- become larger over time such that by 2020, Medicare subscribers only pay 25% for their drugs' retail price1 when in the 'hole.'
The 25% cost sharing was always the goal of Medicare Part D drug coverage but it turned out because of the choice and competition built into Part D, a lot of drugs have ended up costing seniors even less before the 'hole' is reached. The overall Part D program has come in $40 billion dollars under the original estimate of the Congressional Budget Office.
The bad news is -- apparently (I can't find this definitively on medicare.gov but I found it on the Congressional Research Service web site) -- the fixing of dollar limits relative to when the 'hole' starts and ends after 2020 keeps working the same way it has since George Bush began Medicare drug coverage in 2006. That means the upper limit of the 'hole' changes each year from this year's $4700 in out-of-pocket expenses. As a result, very few people will reach the the so-called "catastrophic level" of coverage where drugs only cost 5% of their retail price. But note that only 3% of Medicare beneficiaries reach that point today. So the bad news is actually good news too because it means that most people don't need a lot of expensive drugs.
And -- more good news you don't hear from the Obama re-election propagandists -- only 8% of beneficiaries today fall into the 'hole' in the first place. For more than nine out of 10 seniors, none of this applies. The whole "hole" thing is much ado about nothing, created by Democratic politicians who did not like George Bush's plan (or at least didn't like him getting credit for it).
I'm not defending the idea of the 'hole,' which was basically to put the deductible in the middle of the benefit rather than at the beginning as with most insurance. But remember: until six years ago seniors paid all 100% of all of their drug costs (unless they found coverage privately outside of Medicare). Drug insurance was not available through Medicare until 2006.
Furthermore, if you are a couple making less than $20,000 a year -- which is not uncommon for the truly elderly elderly -- you pay nothing for the Medicare drug insurance and your cannot fall into the 'hole.'
In Massachusetts -- at least -- there is all kinds of protection for couples making up to $75,000 a year in retirement. That covers all but about 10% of retirees (based on nationwide averages). Naturally the benefits are better for lower income middle-class couples than higher. Similar savings are available for individuals at proportionately lower income levels. See the Massachusetts state web site under Prescription Advantage for all the details (be careful on the state web site because some of the web pages are two or three years old).
1That's retail price as negotiated between a manufacturer and your druggist--shop around because different druggists have different prices.