We’re continuing our look at the health care bill  and how it might impact your finances. Today we’ll focus on the $250 Medicare donut hole checks mailed last week.
My grandparents are part of the 31% of seniors living only on social security in their retirement (defined as 90% of income coming from social security alone, study by National Academy of Social Insurance ). They don’t have a pension, they didn’t save for retirement, and unfortunately they have all ready spent the little inheritance they were given by my grandmother’s first generation Hungarian immigrant mother.
Medical problems and perhaps lack of financial knowledge meant that they applied for social security benefits as soon as they were eligible instead of holding off in order to maximize their retirement savings. I don’t know if they did not have the money to save (although I would always argue that no matter what, you can save something), or if they thought that social security would be enough to take care of them. But let me tell you, they are spending their retirement sitting at home, in front of a television, and stressing when property tax, income tax, and other large expenses come in the mail.
Seniors who find themselves on a social security fixed income suffer through medical conditions as well, and they need prescription drugs just like others; however, paying for the prescription medications sometimes leads to deciding between food and medication. As such, I am always happy to hear when my grandparents will be getting a letter in the mail that is not a bill, but rather a check! I am also particularly excited to report that the new healthcare reform  means slowly eliminating the current “doughnut hole” many Medicare enrollees face.
Read on to see if you will be one of the recipients of the $250 Medicare donut hole check.
Why a $250 Donut Hole Check Could be Coming Your Way
There are two dollar limits in the Medicare Part D (effective in 2006) that people care about: the first is the prescription drug coverage limit, and the second is the catastrophic coverage threshold. In between these two limits is what is known as the Medicare Doughnut Hole, which is basically a no-man’s land for drug coverage. If you are stuck in this hole, meaning you have spent your prescription coverage limit for the year, but have not spent enough money on prescription drugs to be at the catastrophic level yet, then you are on your own to pay for the entire cost of your prescription drugs. This can be particularly troublesome for senior citizens who tend to take more drugs than the rest of the population, and especially maintenance-type drugs that are permanent for ailments such as blood pressure, arthritis, diabetes, etc. This chart shows the breakdown of what you pay versus what Medicare pays, the doughnut hole, and the catastrophic coverage .
With the passage of the Patient Protection and Affordable Care Act of 2010, this doughnut hole will be phased out beginning in 2011 when people stuck in the doughnut hole will receive a 50% discount on brand name drugs and a 7% discount on generic drugs (this discount in the doughnut hole will rise over the years until a 75% threshold is met with a complete phaseout by 2020). In the meantime, people on Medicare who fall into this doughnut hole will be given a $250 rebate check in order to help costs.
The first batch of checks was sent on June 10, 2010 to about 80,000 people.
Who Will Get a $250 Check?
Roughly 26% of people on Medicare reach their prescription limits and fall within the doughnut hole, without ever reaching the catastrophic coverage threshold.
According to the chart in the link above, this means these enrollees have paid a $310 deductible, 25% of the first $2,830 on prescription drugs, and then a varying amount of $3,610 before the $6,440 catastrophic limit is met. The Department of Health and Human Services estimates that this equates to 4 million people who will be eligible to receive this checks this year.
How to Get Your Medicare Donut Hole Check
As Medicare people reach the doughnut hole throughout 2010, they will be mailed this $250 rebate check from the Centers for Medicare and Medicaid Services (CMS). CMS will automatically send you a check. No forms are needed in order to receive the rebate.
Stay tuned for a closer look in our entire health care series, including:
- Part 1: Individual Mandate 
- Part 2: $250 Medicare Donut Hole Checks 
- Part 3: Health Insurance for Young Adults 
- Part 4: 1099 Changes in Health Care Bill 
- Part 5: Flexible Spending Account Changes 
- Part 6: Health Savings Account Changes 
- Part 7: Student Loan Forgiveness Program