• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Side Effects: Doughnut Hole Deal Not so Sweet

    Currently 3.4 million Americans seniors covered by Medicare find themselves in a giant “doughnut hole,” but despite the tasty terminology, there’s nothing sweet about it.

    The doughnut hole refers to a gap in prescription drug coverage under Medicare Part D.  As David Hilzenrath explains, “…beneficiaries enter the coverage gap when their prescription tab hits $2,830, including both their share and the amounts paid by insurance. Once in the gap, they are responsible for 100 percent of the cost and must spend $3,610 of their money before qualifying for catastrophic coverage, which typically pays 95 percent of the cost.”

    President Obama has pledged that the Patient Protection and Affordable Care Act will, “in the coming years… close the doughnut hole completely once and for all,” while also conceding that “it’s very expensive to close this doughnut hole…[, and] for us to close that right away would have blown a hole in the budget.”

    The doughnut hole was bad policy to begin with, but no worse than the way Obamacare would close it.  The plan calls for starting to fill the hole through a 50 percent discount on brand name medication—something pharmaceutical manufacturers will be expected to provide for senior citizens in the coverage gap. This half off discount is somehow supposed to come out of the pharmaceutical companies’ hides.  But, as Hilzenrath points out, “The government does not control the underlying price; the law leaves that to the market.”

    What does that mean? Say pharmaceutical drug Generican sold for $50 a bottle last year. Next year there should be a $25 discount, so a Medicare patient would only pay $25.

    But wait.

    There’s nothing holding the original price at $50, so Generican could conceivably raise the price to $100 a bottle and then offer a $50 discount. Though this large of a price hike is unlikely, the important takeaway point is that the half off discount does not guarantee savings.  There are real concerns that pharmaceutical companies will raise prices in the future to make up for lost profits.

    Hilzenrath explains, “the government is trying to establish much lower prices than market forces alone produced,” but despite the sizeable risk of busting the budget, there are no guarantees that drug prices will stay down.

    So, you can expect the politicians to belly up to the bar and reach for Ye Old Rotgut- Price Controls. Price controls, of course, don’t control costs. They merely shift them, and they shift them directly to consumers in the form of — shortages. With 4000 years of experience, we know how that really, really Bad Movie ends. If the true goal is to create a shortage of drugs, well, then this is a really, really great strategy.

    This post was co-authored by Charlie Adair.

    Posted in Obamacare [slideshow_deploy]

    8 Responses to Side Effects: Doughnut Hole Deal Not so Sweet

    1. Robert, Edmonton Alb says:

      What is it about medical care that makes us not want to pay our own way? Usually everyone is, "Let me spend my hard earned money on anything I want………..unless I get sick and then someone else has to pay.

    2. John Hyland, Appleto says:

      I disagree with the notion that the "donut hole" was bad. Perhaps bad for a couple million seniors (most seniors do not reach the hole), but good for the government budget which saves all of us. In fact, it was down right brilliant by the Republicans. There are many programs out there serviced by the drug industry who supplies their drugs for the needy at little or no cost (those drugs that are really expensive). Also, any generic now costs only $11.00 for a 90 day supply ($4.00 for 30 days) at most all drug and discount stores. Hardly a budget busting cost. The real needy are getting theirs through Medicaid for no cost. I really don't see any problem with the current program. Keep it like it was!

    3. Jack Lohman says:

      "Robert from Edmonton" surely must be one of the special interests trying to kill Canada's excellent healthcare system. And if not, Robert, simply increase your spending to 12% of GDP (from its current 10%) and eliminate your wait times. For a country with taxes just 2% higher than ours, your Medicare-for-all system is ideal. Your costs are now 10% of GDP compared to our 17.5%. Be happy (as 90% of your fellow Canadians are).

      Jack Lohman …

    4. Tim AZ says:

      Creating drug shortages for seniors is a wonderful way for socialists to nudge seniors into the grave sooner rather then later. This practice would allow the socialists to blamed pharmaceutical companies for being greedy. All the while the true greed rests in the hands of the socialists who would much rather spend their money on pet projects instead of the elderly that only serve to create a financial drag on socialist causes. The only thing missing is the soylent green. I'm sure they're working on that recycling program as we speak. How's that hope and change going to work out for you?

    5. Jeanne Stotler, Wood says:

      Most drug stores offer a 90 day generic for a set amount, also for a non-generic, although non-generic is more, it is a discount and a lot of companies also offer assistanence on certain meds. If statistics are right, the number of those who spend into the whole is not that great. Another thing is, IS this medicine necessary?/ I know some who think they need a lot of meds, and insist on new Rx's every time they see a doctor. I am a nurse and I can tell you the most active seniors I see(I am one) take very little medication, they go about life as they always did. I am not talking about heart, B/P meds as needed, there are others that mixed with other meds MAY do harm, even OTC meds mixed with certain meds can cause harm.

    6. Ben C. Ann Arbor, MI says:

      Jack Lohman – live in Windsor Canada for a year. I dare you. ALL of my Canadian clients complain about the lack of services in health care and if they need immediate care they come to Henry Ford Medical Center or the DMC. In addition, guess where the burned out Canadian doctors practice and the first two guesses don't count. The closer one lives to a capital city in Canada the better the delivery system. Go figure.

    7. Jack Lohman says:

      Ben, here's one of your Canadian friend's description of Canada:
      http://tinyurl.com/2exjsbn (tell HIM how terrible your system is; he thinks it's great!)

      As well, 90% of Canadians prefer your health care system to ours, and if you don't like it increase your spending from the current 10% of GDP to 17.5% like ours.

    8. cheryl says:

      As an RN I have already seen the devastating effect of Obamacare. I have seen six primary care physicians leave their practice in the last 8 months. In almost 30 years of working in the medical establishment, I have never seen that occur.

      I work with developmentally disabled adults who receive benefits from Medicaid and most also have Medicare.

      Filling their prescriptions has become a nightmare in the past 6 months. In the past we could call a week before the medication ran out to get a refill. We now can not get it filled more than 4 days before. Depending on the pharmacy hours and which day of the week we order the refill, this has resulted in clients running out of medication and having to go without for a day or two. Obviously this is not good. Not taking medication for a day or two can have disastrous results and even cause a serious exacerbation of symptoms resulting in the need for further medical care or hospitalization.

      A large number of drugs ordered for my clients in the past several months have been denied. The insurance will not cover it and the MD is forced to change to another drug that may not be as efficient. In some cases I have seen this take a week as each time the MD changes the drug, it is again denied, delaying treatment by up to or more than a week.

      These things are just a few examples of the negative impact I have seen related to Obamacare.

      I have to wonder what the drug companies are going to do with all the name brand drugs that insurance will not pay for? What is the impact on the future of drug companies to continue to research and develope life saving drugs?

      As far as the, "donut hole issue", sending seniors a check for $250.00 after they have spent thousands of dollars on their medication, it's a joke, and insult, a scam.

      It just proves the point that the politicians who keep trying to promote the, "greatness" of Obamacare are so out of touch with reality it is ridiculous. They have no idea of the cost of filling a prescription. When is the last time they had to go to CVS and pay for a prescription? They should all be forced to do that. They would soon realize. that $250.00 may pay for half the cost of one prescription in many cases.

      As a nurse I am very concerned about Obamacare. I am very aware of it's implications on healthcare in America at all levels. The bill is nothing more than an extension of Obama's dream of taking from the working class to pay for the non-workers. The government can't keep up with the cost of their own giveaway programs so they need to find a way to pay for it. That is being accomplished by redistributing the wealth. I never thought I would see the day that people who try to make a living and work hard to do it, would be persecuted for success.

      The Affordable Health Care Bill has nothing to do with improving healthcare or improving access to healthcare. It will in fact do the complete opposite.

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.