Skip to main content

06-11-2012 | Article

Healthcare law saves $ 4.8 billion in Medicare drug costs


HHS announcement

medwireNews: In an October 25 release by the Health and Human Services (HHS), Secretary Kathleen Sebelius announced that 5.6 million seniors and people with disabilities saved a total of US $ 4.8 billion on prescription drugs to date on account of the implementation of the Affordable Care Act (ACA) in 2010.

A major portion of the savings stems from a reduction in out-of-pocket costs that Medicare beneficiaries otherwise would have incurred due to a gap in the plan's coverage, known as a "donut hole."

Formerly, this lapse in coverage arose once the sum of the deductable, copayments and Medicare payments reached $ 2840, at which point enrollees would subsequently take on all prescription drug costs. The drug plan resumed paying most costs of covered drugs for the rest of the year once total out-of-pocket spending reached $ 4550.

The ACA has allowed beneficiaries numbering 2.3 million to save an average of $ 657 so far this year due to lowered costs, while 20.7 million seniors with original Medicare also received at least one free preventative service such as an annual wellness visit, cancer screening, or mammogram.

"I am pleased that the health care law is helping so many seniors save money on their prescription drug costs," Sebelius said. "Medicare is stronger thanks to the health care law, offering new benefits at no cost to seniors."

The projected increase in savings from the healthcare law would close the donut hole entirely by 2020. With total costs falling for a typical beneficiary with original Medicare limited to 25%, they are expected to save an average $ 5000 between 2010 and 2022.

Thus far, beneficiaries who reached the donut hole expenditure threshold in 2010 received a $ 250 rebate, while in 2011 those same people received 50% discounts on covered brand-name drugs as well as savings on generic drugs. For 2013, the brand name drug discounts and generic drug savings will be 53% and 21%, respectively.

The ACA is expected to reduce beneficiary spending by saving $ 500 billion over the next 10 years, according to The savings hinge on providing free preventative services to seniors, slowing the rate increase of premiums for physicians and certain services, as well as reducing the growth in payments to hospitals and other providers.

Efforts to make the Medicare program more efficient and free from waste, fraud, and abuse are also expected to result in further cost cutting.

By Peter Sergo, medwireNews reporter