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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