The Medicare Part D coverage gap has been coined the “doughnut hole” because beneficiaries with high prescription drug costs must pay out of pocket after they reach a certain threshold. Before 2019, all Medicare Part D plans have “doughnut holes” or gaps in coverage. In February this year, President Trump signed a budget deal that will actually close this coverage gap in 2019.
What is the Medicare doughnut Hole?
The Medicare Part D doughnut hole is a time in the year when Medicare doesn’t cover your prescription drug expenses. It kicks in after you reach a certain amount of spending and ends after you spend a certain amount out-of-pocket.
Congress designed Part D so that it would provide coverage for the majority of your prescription drugs. However, a small percentage of people have medication costs that go well beyond average spending. Those people then pay a greater portion of the costs for their medications when they enter the coverage gap.
The gap also serves to encourage beneficiaries to seek generics or drug alternatives that are lower in cost. This helps Medicare to keep the total costs for the Part D program as low as possible.
How Does the Medicare Coverage Gap Work?
The Medicare doughnut hole is a gap inside of your Part D plan. Basically, if your spending for prescription drugs exceeds $3,750 on, you will have to pay 35% of the cost of brand-name drugs and 44% of the price of generic drugs. Once out-of-pocket costs exceed $5000, Medicare coverage will kick in again and you will not have to pay more than 5% of your prescription drug costs for the rest of the year.
Some medications fall outside of Part D altogether, and therefore do not get tallied toward the Medicare doughnut hole. Make sure to find out if your prescription drug is covered by Medicare Part D.
While the coverage gap can be hard financially, things are getting better. In 2019, brand-name drugmakers will pay 70% of enrollees’ brand-name prescription drug costs.
Have You Reached the Doughnut Hole?
Your Part D company will send out an explanation of benefits (EOB) each month. This tells you exactly how much you have already spent on covered medications and how much spending you have left before you reach the coverage gap threshold. Likewise, after you reach the gap, your insurance company will continue to send you notices that track your gap spending. They will calculate how much spending is left before you reach catastrophic coverage.
When does the Medicare Doughnut Hole End?
The doughnut hole ends when you reach the catastrophic coverage limit for the year. In 2018, the doughnut hole will end when you spend $5000 out-of-pocket during the year. That limit is not just what you have spent but also any discounts you received in the doughnut hole. That means your out-of-pocket may be less than $5000.
So how do you get out of the doughnut hole? Unfortunately it’s by paying for medications through the doughnut hole until you reach catastrophic coverage level.
Do Medicare Advantage plans cover the Doughnut Hole?
No. The Part D coverage inside of a Medicare Advantage plan works exactly the same way that standalone Part D plans works. Some Part D companies and Medicare Advantage companies might offer coverage of certain medications in the gap. However, this is almost always coverage of generic medications and rarely brand name medications. This doesn’t really help a great deal since the drugs that cost so much in the coverage gap are brand-name drugs, usually not generics.
How Can I Avoid the Doughnut Hole?
The best way to avoid the doughnut hole is to spend less by using generic medications whenever possible. You can also consult your doctor about your drug spending. Tell your doctor which drugs are costing you the most on your Part D plan, and see if he/she can recommend any cheaper alternatives. Some medications may not have a generic equivalent on the market yet, but there may be other similar medications that are cheaper that achieve a like result.
Exemptions from the Coverage Gap
It’s important to note that Medigap plans will not cover costs in the Medicare Part D coverage gap. Furthermore, there are no Medicare Part D plans without a doughnut hole. There is also no insurance plan that you can buy to cover you in the Medicare doughnut hole.
However, certain people may qualify for a low-income subsidy called Extra Help for Part D. If you qualify, then you will not have a Part D gap. Your ordinary copays on your prescriptions will also be lower by a bit. You can apply for the subsidy at your local Social Security office or online at their website.
How to Reduce Medicare Part D Coverage Costs
Since Medicare tallies the total cost of your medications toward the Medicare Doughnut Hole, you should know the full cost of each drug you are taking. Fortunately, this is easy to do by reviewing your statements from the insurance company.
All insurance agents at Safe Policies Insurance train extensively to analyze your potential drug spending in the coming year. We can help you find a plan that offers you the lowest possible annual drug spending. Worried about the coverage gap? Ask for free help from our agency with Part D when you have purchased your Medicare supplement through us.