PPACA Tax Overview BenefitMall Reference Guide - (Page 14)

PART C: Medicare Part D Updates 5.9 What are some of the Medicare Part D improvements? PPACA also includes a provision that addresses the gap in drug coverage in Medicare Part D. This gap, called the “Donut Hole,” has left many Medicare enrollees without sufficient prescription drug coverage. Many Medicare Advantage Prescription Drug Plans often do not have a Donut Hole, but the coverage is more expensive. Beginning in 2011, PPACA provides for a 50% discount on covered name brand drugs that Medicare enrollees need. 5.10 How does the Medicare Part D Coverage work? Healthcare.gov provides information that explains the updated Medicare Part D prescription drug discount program. The Congressional Research Service also provides a helpful explanation of the Donut Hole as it was in 2010.26 How the program currently works: • Patients pay out-of-pocket for monthly Part D premiums. • Patients pay 100% of their drug costs until they reach the $310 deductible amount. • After fulfilling the deductible, a patient will pay 50% for brand name drugs and 86% for generic drugs, while the Part D plan pays the rest, until the total spent on an individual’s drugs reaches $2,830. • Once the patient reaches $2,830, the patient has reached the coverage gap referred to as the “Donut Hole,” and he or she is now responsible for the full cost of their drugs until the total the catastrophic threshold of $6,440 is reached. Specifically between the $2,830 to $6,440 threshold, each patient will pay 100% of the costs. • After hitting this annual spending limit, patients are only responsible for a small amount of the cost, usually 5% of the cost of the drugs thereafter. This is referred to as Medicare catastrophic coverage. 14 Published by BenefitMall® PUTTING PUZZLE Starting in 2013, patients will pay less and less for your brand name Part D prescription drugs in the Donut Hole. By 2020, the coverage gap will be closed, meaning there will be no more “Donut Hole,” and you will only pay 25% of the costs of your drugs until you reach the yearly out-of-pocket spending limit. HHS has also provided further information in its 2010 Medicare & You Handbook. 5.11 What are the tax consequences of the Medicare Part D Program for employers? Law Professor Edward A. Zelinsky, a well-known tax expert, provided a concise answer to this question when he wrote: When Congress adopted Medicare Part D, providing drug coverage for seniors, Congress simultaneously created income tax-free subsidies to employers continuing their own drug coverage for their retirees. Congress also permitted employers to deduct, for income tax purposes, any outlays made with these subsidies to provide retiree drug coverage. Starting in 2013, PPACA deletes from the Code permission for employers to deduct such subsidized outlays for retirees’ drug coverage. http://www.Healthcare.gov

Table of Contents for the Digital Edition of PPACA Tax Overview BenefitMall Reference Guide

PPACA Tax Overview BenefitMall Reference Guide
Table of Contents
Individual Mandate & Tax Implications
Premium Subsidies
Employer Requirements & Tax Implications
PART A: Small Employer Tax Credits
PART B: Large Employer Tax Penalties
PART C: Employer W-2 Reporting Requirements
PART D: Employer Deductions for Retiree Drug Coverage
Additional PPACA Tax Provisions Impacting Employers & Employees
PART A: The Unearned Income Medicare Contribution Tax
PART B: Excise Tax on Comprehensive, High-Cost Health Insurance Plans
PART C: Assessing the Impact of PPACA on HSAs, MSAs, FSAs, & HRAs
Medicaid & Medicare Changes & the Impact on Employers
PART A: The Expanding Medicaid Program
PART B: Emphasis on Prevention & Related Services
PART C: Medicare Part D Updates
PART D: Putting the Coverage Puzzle Together

PPACA Tax Overview BenefitMall Reference Guide

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