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Medicare Part D Donut Hole
Whether you’re about to enroll in a Part D plan, or you’re currently enrolled in one, it’s important to understand how the donut hole works. Below, we’ll explain what the donut hole is and how to prepare for it.
What is the Donut Hole in Medicare
The Medicare Donut Hole is the coverage gap part of Part D. During this period; the beneficiary will have a temporary limit on their prescription drug coverage. So, after spending a particular amount on a drug plan for prescription drugs, you’re responsible for copayments for drugs. Then you have responsibility for expenses up to a specific out-of-pocket limit.
Some of the things that count towards the out-of-pocket limit include co-payments, coinsurance, the yearly deductible, and what you pay during the coverage gap.
For Medicare beneficiaries who find themselves falling into the Medicare Part D donut hole, the Bipartisan Budget Act is here to help. The donut hole is the Part D coverage gap.
Before, beneficiaries didn’t have coverage during the donut hole. So, beneficiaries would pay 100% of brand-name drug expenses during the gap.
The donut hole became expensive for many seniors. Because of the Affordable Care Act as well as the Bipartisan Budget Act, the donut hole will end. Those taking brand-name drugs will have coverage at 75% during the donut hole. Beneficiaries getting generics will have coverage at 63% during the coverage gap.
How Does the Medicare Donut Hole Work
You’ll enter the coverage gap when you deductible, total drug costs, the insurers’ costs, and your co-pays reach $4,130. During the gap period, you must pay a certain percentage of the total cost of both brand-name and generic drugs. Medicare beneficiaries pay their deductible if applicable, and their copays until the costs reach $4,130 for prescription medications.
Once a beneficiaries drug cost exceeds $4,130, they “fall” into the donut hole. Beneficiaries become responsible for paying the next $6,550 for prescription drugs. After paying $6,550 out of pocket, the beneficiary reaches the catastrophic coverage phase.
While in the catastrophic coverage phase, beneficiaries pay 5% of the cost of their prescription drugs for the remainder of the year.
Medicare gets a certain percentage of discounts on brand-name medicines by drug manufacturers while the federal government pays the rest. Overall, Congress is trying to lower the cost of Part D.
The monthly statements you obtain from your plan provider should show your current status regarding the donut hole.
How to Avoid the Medicare Donut Hole
If brand name drugs are a requirement for you, avoiding the donut hole could be near impossible. However, if you’re flexible in using generics drugs, prescription costs could be substantially lower.
You can prevent the coverage gap if:
- The cost of your drugs for the year does not go beyond a specific amount
- You have additional coverage from your employer or union benefits which covers part or all costs
- Medicare drug plan includes medicine while in the gap, usually for a higher premium. Prices for the additional coverage vary from plan to plan
- Use a discount Part D card to help lower your costs
There is a low-income subsidy called Extra Help. The subsidy is a federal program that helps individuals with low-income pay for the Medicare Part D costs, like deductible, copayments/coinsurance, and premiums. You can apply for this program through the Medicaid department or the Social Security Administration.
How Do I Get Out of the Donut Hole Gap?
You’ll get out of the gap when out-of-pocket payments and anything you paid for medicines during the gap period reaches a certain amount. Note that, the manufacturers’ contribution to the brand-name medicines counts towards your limit.
However, the amount contributed by the government does not count towards the limit. Once you reach the limit, catastrophic drug coverage will kick in automatically, and your policy will settle 95 percent of the remaining costs until the year-end. This cycle repeats every calendar year.
When Does the Medicare Donut Hole End
The donut hole is slowly closing since the passing of the Affordable Care Act. Beneficiaries are expected to pay 25% of their brand name drug costs while in the donut hole.
Beneficiaries have gone from covering 100% of their prescriptions in the donut hole to around 25% of the cost of brand name drugs. You’ll no longer have to choose between expensive medications that work vs. drugs that cost less but aren’t as beneficial.
The Donut Hole Still Exists
To clarify, the “donut hole” still exists. However, the government is requiring pharmaceutical companies to cover more. Thus, resulting in lower out of pocket expenses and closing the gap faster.
The Bipartisan Budget Act requires pharmaceutical companies to offer the same discounts to Medicare beneficiaries as they provide insurance providers and pharmacies.
How Do I Get My Prescriptions During the Gap Period?
You can purchase prescriptions at your pharmacy during the donut hole. Your insurer will track your costs so that they can be able to count toward your out-of-pocket limit. You can also get your drugs elsewhere, which are less expensive than what your plan charges.
Only medicines bought at pharmacies within the network of your plan contribute to the Medicare donut hole limits. When you buy over the counter medicine, that doesn’t count towards your donut hole costs.
What is Donut Hole Prescription Assistance
Ask your doctor if any other medicine on your plan’s prescription would be as effective for your condition as the ones you’re currently using. Using lower-cost drugs, like generics or similar drugs, but older brand-names will substantially lower your costs.
It pays to have donut hole assistance like Extra Help or a state pharmacy assistance plan that can pay a portion or all your costs while in the gap. If you don’t have additional coverage help, you can consider non-insurance sources of support like:
- Lower-cost drugs from countries like Canada
- Free or low-cost medicines supplied by charities, patients’ organizations, or local medical clinics.
- Low-cost or free medicines from the assistance programs, managed by pharmaceutical manufacturers
How to Get Help with the Donut Hole
Having Part D coverage as soon as your eligible for Medicare will ensure you don’t incur a Part D late enrollment penalty. There are many Medicare Supplement plan options and carriers to choose from, like Aetna and Mutual of Omaha.
To compare Medicare Part D insurance plans online today, you can use the Medicare Plan Tool Finder. Fill out our rate form so we can give you different rates as charged by various insurance providers that offer plans in your area.