Beginning this week seniors should have already started receiving checks from the federal government for the purpose of closing the so-called donut hole — a provision of the MMA of 2003 that left many Medicare Part D beneficiaries out in the cold when trying to pay for their prescription drug coverage. People who fall into this gap are responsible for $3,610 in drug costs in 2010 before their Medicare coverage kicks in again. The “hole” is gradually being phased out over the next 10 years.^[1] Over 4 million people will receive $250 checks this year.

Sounds innocuous enough. But one state is asking the government to reclaim those funds. Vermont, which has some 2800 low-income seniors scheduled to receive the Part D refund checks, is asking beneficiaries to return the money. Since the state of Vermont is funding drug costs for its beneficiaries via public-funded insurance programs (OVHA), it is asking seniors to return the checks — as the state is on tap to receive almost $600,000 in rebates due to the action.

While the goal of the feds is to eliminate this troublesome provision as part of Obama’s healthcare reform package, this episode does highlight the difficulty some states have with federal mandates to cover certain costs associated with the delivery of healthcare when they essentially don’t agree with those mandates. By the way, if seniors decide not to refund the government’s money, says Vermont, they will be subject to a $250 deductible in their state-subsidized insurance plan for drug costs. | LINK

1. Next year, the rebates will be replaced with discounts that will increase each year until the gap is effectively eliminated in 2020. [↩]

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