By Julianne Pepitone, staff reporterJune 7, 2010: 1:17 PM ET
NEW YORK (CNNMoney.com) — The government is mailing $250 checks this week to seniors who fall into the gap in Medicare’s prescription drug coverage.
The first checks will be sent June 10, three weeks earlier than scheduled, to about 80,000 people. The rebates are the first step in closing the Medicare “donut hole.”
The Department of Health and Human Services estimates that about 4 million seniors will get the rebates in 2010.
The move is one of the first tangible results of the health reform law. At a press conference last month, HHS Secretary Kathleen Sebelius said closing the donut hole is “one of the biggest ways the new law is going to help seniors.”
Seniors get stuck in the donut hole if their prescription drugs cost too much to be paid for through basic Medicare coverage, but aren’t expensive enough to qualify for catastrophic coverage.
“We think our members will see these checks as a good faith down payment on what they’ve been looking for so long: closing this coverage gap,” said Cheryl Matheis, AARP’s senior vice president for health strategy.
“Many Medicare patients are on a fixed income, so every dollar helps,” she added.
What’s the donut hole? In addition to a $310 deductible, Medicare beneficiaries pay 25% of their drug costs until the total reaches $2,830 for the year. Then, they fall into a coverage gap. At that point, enrollees must pay all costs out of pocket until their annual expenses exceed $6,440. After that, seniors pay 5% of drug costs for the rest of the year.
Starting in 2011, seniors who fall into the donut hole will receive a 50% discount on brand-name drugs. The discount for generic drugs will be 7%. Those figures will rise over the years, eventually reaching a total 75% discount that effectively will eliminate the gap in 2020.
The Centers for Medicare and Medicaid Services said checks will be mailed monthly throughout the year as Medicare beneficiaries hit the donut hole. Those who qualify can expect to receive their check within 45 days of reaching the gap.
The CMS also warned of potential scams, noting that qualifying seniors will receive their checks automatically and are not required to fill out any forms. Seniors don’t need to provide any personal information such as Medicare or Social Security numbers in order to receive the rebate.
“Medicare beneficiaries waited a long time to get prescription drug coverage in the first place,” said AARP’s Matheis. “Once we close the gap, that need will finally be truly fulfilled.”