Health care: Big change in drug costs for seniors

By Parija Kavilanz, senior writer


NEW YORK (CNNMoney) -- Under health care reform, consumers will see several new changes to their insurance coverage this year, the most significant of which affects the nation's 47 million Medicare beneficiaries.

Amy Bergner, principal with global benefits consulting firm Mercer, said senior citizens who are also Medicare enrollees will see the biggest effects.

"One of the most important changes is how much seniors will now pay for prescription medicines," Bergner said.

Here's what you need to know:

  • 50% discount on prescription drugs: On Jan. 1, drugmakers began giving seniors a 50% discount on brand-name prescription medicines filled in the Medicare Part D "coverage gap."

When Medicare beneficiaries fall into the coverage gap, also known as the "donut hole," Medicare stops paying for drug coverage and patients can't afford to pay for drugs out-of-pocket. The legislation aims to close the hole by 2020.

  • Free preventive care: On Jan. 1, seniors on Medicare became eligible for certain free preventive services, such as annual checkups, some cancer screening tests and personalized prevention plans that include a full health risk assessment.
  • Post- hospital care: On Jan. 1, the Community Care Transitions Program kicked in. The program is designed to help Medicare beneficiaries who are hospitalized avoid unnecessary readmissions by coordinating care and connecting them to health services in their communities.
  • Changes to tax-free health savings accounts: Starting in 2011, you can no longer use money from your flexible spending account to buy over-the-counter drugs that are not prescribed by your doctor.
  • Rebates to consumers: This year, insurance companies have to spend 80% to 85% of premiums on medical care instead of toward their own profits and overhead costs. If insurers fall short of that target, they will have give a rebate to their customers beginning in 2012.

The health care reform legislation, passed last year, phases in a number of new provisions yearly until 2014 -- when most of the changes mandated by the new health law take place. To top of page

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