Senior Healthcare Advisors

Donut Hole With Medicare Part D Explained:

When it comes to Medicare Part D or prescription drug coverage, you may have a few questions about the coverage gap. This is also known as the “donut hole.” The donut hole coverage gap has a temporary limit on what most Part D Prescription Plans or Medicare Advantage Drug plans pay for your prescription costs. While you are in the coverage gap, you may pay higher costs for generic drugs and brand-name medications.

The coverage gap begins by applying to both Medicare Advantage Prescription Drug plans and stand-alone Medicare Prescription Drug Plans. If you’re currently taking prescription medications or concerned about lowering your drug costs, it may be helpful for you to see what the coverage gap is and how to avoid it.

What is the “donut hole” coverage gap, and when does it start?

For those who are new to the coverage gap, or donut hole, learning about the difference is a good place to start. What your Medicare plan may pay for prescription drug costs will depend on the coverage phase you’re in. Each new coverage phase begins once your spending costs has reached a certain amount.

Medicare Prescription Drug Plans and Medicare Advantage Prescription Drug plans can have these four coverage phases, as applicable:

The Initial Coverage Phase: After you’ve reached your deductible, you will enter the initial coverage phase, where you will pay the plan’s cost share for covered prescription medications. For example, if your coverage plan benefit includes a 25% co-insurance in this phase and you’re taking a prescription that costs $400 a month, then your out-of-pocket-cost would be about $100 a month. Once you have spent $3,750 in 2018 for covered drugs, including your deductible amount, you’ve reached the initial coverage limit and you will have entered the coverage gap. This coverage limit may change annually.

The Deductible Phase: For most stand-alone Medicare Drug Plans and Medicare Advantage Drug plans, you’ll pay 100% for medication costs until you reach the yearly deductible amount if your plan has one. After you reach the deductible amount, the Medicare plan begins to cover its share of prescription medication costs. The deductible amount can vary by plan, and some plans might not have a deductible. If your Medicare coverage plan does not have a deductible, then you will start your coverage in the initial coverage phase.

The Coverage Gap, also known as the “donut hole”: Not every individual will reach this phase; this all begins if you and your plan spend a combined coverage cost of $3,750 in 2018 as described above. While in the coverage gap, you will typically pay 44% of the plan’s cost for generic drugs and 35% of the plan’s cost for name-brand drugs. You are out of the coverage gap once your yearly out-of-pocket medication costs reach $5,000. Once you have spent this amount, you have entered the catastrophic coverage phase.

The costs paid by you for Part D medications on your plan’s formulary, or list of covered medications, will count toward your out-of-pocket costs and will also help you get out of the coverage gap. Additionally, manufacturer discounts for name-brand drugs count towards reaching the spending limit that begins your catastrophic coverage. However if your plan requires you to get your prescription drugs from a participating pharmacy, please make sure you do so, or else the costs may not apply towards getting out of the coverage gap. Also, keep in mind that costs that are paid for you by other insurance you may have, such as prescription medication coverage through an employer, will not count towards your out-of-pocket spending.

The Catastrophic Coverage Phase: Again, not every individual will reach this phase; it begins if your out-of-pocket costs reach $5,000. During the catastrophic coverage phase, you will only pay a small co-insurance or co-payment for covered prescription medications for the remainder of the year.

If the formulary changes at any time. You will then be notified by the Medicare plan provider if necessary.

What costs will count towards getting out of your coverage gap or donut hole?

Once you have entered the coverage gap, it’s important to see which out-of-pocket costs count towards helping you reach the catastrophic coverage phase. Remember, once your prescription medication spending costs reaches $5,000, you will be out of the coverage gap and you will have catastrophic coverage for the rest of the year.

These are the following costs that count towards your out-of-pocket spending and getting you out of the coverage gap (“donut hole”).

Your annual deductible Co-payments and co-insurance costs spent by you and your coverage plan during the initial coverage phase

Co-payments and co-insurance spent by you in the coverage gap, this is 35% of the plan’s cost for name-brand medications and 44% of the plan’s cost for generic’s

The 50% manufacturer discount for name-brands while you’re in the coverage gap

Which costs don’t count towards getting out of the coverage gap or donut hole?

Not all out-of-pocket spending costs count towards reaching your catastrophic coverage. The following costs don’t count towards getting you out of the donut hole:

The monthly premium for your Medicare Drug Plan or Medicare Advantage Drug plan

The costs you pay for prescription medications that aren’t covered by your Medicare plan formulary list

The dispensing fee that pharmacies may charge

How do I avoid the Medicare Part D donut hole?

Now that you know about the coverage gap (“donut hole”), here is some great news:

Most Medicare beneficiaries won’t have to pay this price increase during the donut hole because their prescription medication costs won’t reach the initial coverage limit of $3,700.

Individuals who qualify for extra financial help (or the Low-Income Subsidy) will avoid the donut hole, or coverage gap. Extra Help is a federal program that helps eligible individuals with low income pay for Medicare Part D costs such as premiums, deductibles, and co-payments/co-insurance. If you do qualify for this assistance, you won’t enter the coverage gap. You can apply for the Extra Help program through your state’s Medicaid department or the Social Security Administration.

Although most Medicare Prescription Plans and Medicare Advantage Prescription plans have a coverage gap, some plans will offer additional coverage during the coverage gap. Spending costs for this additional coverage during the donut hole will vary by plan.

Federal legislation is minimizing the coverage gap every year until it reaches 25% in 2020. In 2020, beneficiaries will pay 25% of the plan’s cost for name-brand drugs and 25% of the plan’s cost for generic medications in the coverage gap.

Managing your out-of-pocket prescription costs is a large part of avoiding the coverage gap.

Here are some useful tips on how you can lower the amount you spend on prescription medications so that you don’t enter the coverage gap:

There are many expensive prescription drugs that have a generic or lower-cost alternative. Changing to a lower-cost prescription may help you avoid entering the coverage gap. Speak with your doctor or pharmacist about whether there are lower-cost prescription drugs available that are just as effective for your condition.

Individuals who do not meet income requirements for Extra Help may be eligible for financial assistance from the drug manufacturer of the name-brand drug. Visit Senior Healthcare Advisors to find out if there’s a Pharmaceutical Assistance Program for the medications you take.

If you have any questions about how the coverage gap works and how you can avoid it, we can help. A licensed insurance agent can help you compare formularies for the Medicare Advantage Prescription Drug plans and Medicare Prescription Drug Plans we offer to determine if your prescriptions are within your budget. This makes choosing a Medicare Prescription Plan that much simpler. As mentioned earlier, please keep in mind that formularies may change at any time; your Medicare plan provider will notify you if necessary. Remember, because your risk of entering the donut hole, in part, on how high your out-of-pocket costs are, it will be helpful to research if there are Medicare plan options that could save you money. That’s where we come in Senior Healthcare Advisors is the nation’s largest provider of Medicare Knowledge and guidance.

Whether you’re enrolling in Medicare Part D for the first time or want to reevaluate your current prescription coverage, we can help guide you through the maze of Medicare Part D prescription drug coverage and the coverage gap.

For more information about the donut hole with Medicare Part D, CLICK HERE to get your free quote today.