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On Wednesday, April 7, 2004, Congressman Robert T. Matsui hosted a Town Hall meeting at the Sacramento Unified School District’s office, where he discussed the new Medicare prescription drug provisions with over 100 Sacramento residents. Matsui provided the crowd with a review of the changes in Medicare that were approved by Congress and the President in late 2003, and highlighted their impact on seniors. He also described seniors’ options in purchasing Medicare discount drug cards that will be available in June. They will be effective until the new prescription drug benefits start in 2006. If you were unable to attend, you can still view all of the important information Congressman Matsui shared at the town hall meeting.
How Big Is the Donut Hole?
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| $250 | Deductible |
| +$500 | 25% of drug spending between $251 and $2,250 |
| $750 | Beneficiary out-of-pocket spending (not including $35/month premium) for $2,250 worth of prescription drugs. |
Drug Spending Needed to Reach the Second-Tier Limit or Near-Catastrophic Coverage
| $3600 | Trigger in out-of-pocket spending for Second-Tier coverage |
| -$750 | Amount already spent under initial benefit limit |
| $2850 | Amount of remaining out-of-pocket spending needed to reach trigger |
The Gap/Donut Hole
Thus, the "gap" or "donut" is the $2850 in spending after the initial $2250 benefit limit and before $3600 out of pocket trigger is reached
Total Drug Spending Needed to Trigger Second Tier Coveage
| $2250 | Total drug spending under initial benefit limit (pre-"donut") |
| $2850 | Beneficiary out-of-pocket spending during the "donut" |
| $5100 | Total drug spending to get to second-tier or near-catastrophic coverage |
So, if a senior has $5100 in drug costs per year, they would pay:
| $750 | Amount spent under initial benefit limit |
| $2850 | Cost to senior in the donut hole |
| $420 | $35 x 12 in monthly premiums |
| $4020 | Total cost to senior to receive $5,100 in drugs in one year |
Catastrophic Cap
For any costs above the $3,600 in out-of-pocket spending or $5,100 in total drug costs the senior continues to pay 5% of the cost.
- Prepared by the Committee on Ways and Means
and the office of Congressman Robert T. Matsui
November 21, 2003
Medicare Prescription Drug Act
Prescripton Drug Examples
(1) A senior with $2,250 in drug costs in a year will pay:
| $420 in premiums ($35 each month x 12) | |
| $250 deductible | |
| $500 which is 25% of drug costs from $251 to $2,250 | |
| Senior's cost: | $1,170 for $2,250 in drugs. |
This senior pays more than 50% of their drug costs.
(2) Now, consider the senior whose drug costs fall above $2,250 and are therefore in the "donut hole" hwere the senior must pay 100% of the cost.
Let's say this senior has $3,500 in annual drug costs. This does not exceed the $5,100 total drug costs threshold necessary to trigger the near-catastrophic coverage. They will pay:
| $1,170 for the first $2,250 as noted above | |
| $1,250 which is 100% of the difference between $2,250 and $3,500 | |
| Senior's cost: | $2,420 for $3,500 worth of drugs |
This senior pays 70% of the cost.
(3) A senior with $5,500 in drug costs each year would reach the near-catastrophic trigger because they have total drug costs above $5,100. They will pay:
| $1,170 for the first $2,250 as noted above | |
| $2,850 for 100% of cost in the donut hole ($5,100-$2,250=$2,850) | |
| $20 which is 5% of $400 (the difference between $5,100 and $5,500 | |
| Senior's cost: | $4,040 for $5,500 worth of drugs |
This senior pays 74% of the cost.
- CBO estimates that in 2006 when the drug benefit begins, on average, seniors will spend $3,155 on drugs, placing them squarely in the donut hole.
- According to the Kaiser Family Foundation, almost 40% of Medicare beneficiaries spent more than $2,000 on drugs in 2002.
- According to the Kaiser Family Foundation, 14% of Medicare Beneficiaries spent more than $4,000 on drugs in 2002.
- Prepared by the office of Congressman Robert T. Matsui, November 21, 2003