One of the most important achievements included in the new health care law passed earlier this year was the move to close the infamous gap in coverage provided to seniors under "Part D" of the Medicare prescription drug benefit – the so-called "donut hole."

The change is already paying dividends. In May, many people who have a Medicare prescription drug benefit began receiving a tax-free $250 check from the federal Department of Health and Human Services to help pay for prescription drugs. The checks are being sent directly to anyone who falls into the coverage gap in 2010. In North Carolina, 30 percent of Medicare Part D enrollees will reach the coverage gap and be eligible for this one-time payment. No one needs to apply for or request the payment. When the total costs of prescription drugs for the year reaches $2830 – the donut hole threshold – Medicare will automatically send the payment.

The first checks went out the week of June 10 for those who fell in the hole early in the year. For those who enter the coverage gap later in the year, checks will be sent out by the Department on a monthly basis. Virtually everyone who enters the donut hole will receive a check. Certain people with limited incomes, such as those in nursing homes, or those who receive Medicaid or Supplemental Security Income (SSI) already receive federal subsidies and do not experience additional cost or a coverage gap.

Happily, the rebate checks are merely the first of many steps of the new health care law that will fully close the donut hole over the next decade. The real action on closing the hole starts next year when drug manufacturers will be required to provide 50 percent discounts on brand-name and biologic drugs to Part D enrollees while they are in the donut hole. In addition, the Medicare program will provide a seven percent discount on generic prescription drugs for Part D enrollees while they are in the hole. After 2011, the discounts will grow larger and the gap will gradually narrow until it is completely eliminated in 2020.

Closing the donut hole in was a top priority for AARP and other pro-reform advocates. Prior to enactment of this legislation, millions of Medicare beneficiaries have been hitting the gap in coverage that begins when total spending on drugs reaches a set limit (this year it's $2,830). Beneficiaries then had to pay the full costs of medication until they had paid $4,550 out-of-pocket, including deductibles and copayments.

Another welcome benefit in the new law is the elimination of out-of-pocket drug costs for chronically ill Part D enrollees who are also enrolled in Medicare and who receive home and community based services rather than going into a nursing home. This provision makes the same benefit available to those who live at home with assistance as those who enter nursing homes. When combined with variety of preventive care and wellness benefits that will also be available at no charge to beneficiaries, it's clear that the new law is a big win for Medicare enrollees.

Still, in spite of these significant victories, AARP and other advocates did not gain all that they had worked to get. Perhaps the biggest disappointment was the failure of the new law to grant authority to the Secretary of Health and Human Services to negotiate for drug prices for the Medicare program. As a result, drug manufacturers still have no limits on how much their prices can rise and, indeed, are continuing to raise prices at a time when the stagnant economy has produced an overall inflation rate of near zero.

The May 2010 AARP Rx Watchdog report illustrates the huge impact of this omission. It notes that: "Despite a near-zero rate of inflation for all consumer goods and services, manufacturer prices for widely used brand name and specialty drugs rose by more than nine percent, on average, in the twelve month period ending with March 2010…." During this same period, prices for generic drugs fell by an average of over nine percent.

In other words, though affordable generic drugs are saving consumers millions of dollars, the lack of authority expand their use is costing us billions. As a result, even though brand name drugs accounted for only 30 percent of prescriptions filled in the US market in 2009, they accounted for roughly 85 percent of total drug spending. The AARP report goes on to say that, "…if escalating drug prices are not addressed, the substantial value of closing the donut hole could be eroded over the years."

Fortunately, AARP and other consumer advocates will continue their work to rein in drug prices for Medicare beneficiaries. Let's hope these efforts bear additional fruit very soon and that the closure of the "donut hole" is just the beginning of our success.

Bonnie Cramer is the 2008-2010 chair of the Board of national AARP and an advocate with the Campaign for Better Care.