By Jonathan Blum, Deputy Administrator and Director for the Center of Medicare at the Centers for Medicare and Medicaid Services
A number of visitors to www.HealthCare.gov have told us they’d like to know more about the Medicare “donut hole” in the Part D program.
If you aren’t familiar with Medicare, it is a health insurance program for people 65 or older, people under 65 with certain disabilities, and people with End-Stage Renal Disease (permanent kidney failure). People with Medicare have the option of paying a monthly premium for outpatient prescription drug coverage. This prescription drug coverage is called Medicare Part D.
In 2010, basic Medicare Part D coverage works like this:
- You pay out-of-pocket for monthly Part D premiums all year.
- You pay 100% of your drug costs until you reach the $310 deductible amount.
- After reaching the deductible, you pay 25% of the cost of your drugs, while the Part D plan pays the rest, until the total you and your plan spend on your drugs reaches $2,800.
- Once you reach this limit, you have hit the coverage gap referred to as the “donut hole,” and you are now responsible for the full cost of your drugs until the total you have spent for your drugs reaches the yearly out-of-pocket spending limit of $4,550.
- After this yearly spending limit, you are only responsible for a small amount of the cost, usually 5% of the cost of your drugs.
You may have read in the 2010 Medicare & You Handbook that there are some Medicare Part D plans that offer coverage in the donut hole—but these plans may charge a higher monthly premium. (There are also some Part D plans that are “enhanced” and offer fixed co-pays (for example $5, $10, and $20) for prescription drugs instead of the deductible and 25% cost-sharing that was described above. These plans also may charge a higher monthly premium.)
For those that qualify, there is also a program called Medicare Extra Help that helps you pay your premiums and have reduced or no out-of-pocket costs for your drugs.
Needless to say, for most people with Medicare Part D, the donut hole presents serious financial challenges. Some people have had to choose between their rent or groceries and their prescription drugs.
But, the recent health reform law – the Affordable Care Act – has some important changes that will help to relieve this burden for the people with Medicare that hit the donut hole each year (and are not already on a program called Medicare Extra Help,):
- This year, if you enter the Part D donut hole, you will receive a one-time, $250 rebate check. The mailing of these checks began in June. If you are eligible and do not receive your check, call your Part D plan first and then 1-800-Medicare.
- Starting in 2011, you will receive a 50% discount on brand-name drugs in the donut hole, and you will start to pay less and less for your generic Part D drugs in the donut hole.
- Starting in 2013, you will pay less and less for your brand-name Part D prescription drugs in the donut hole.
- By 2020, the coverage gap will be closed, meaning there will be no more “donut hole,” and you will only pay 25% of the costs of your drugs until you reach the yearly out-of-pocket spending limit.
Throughout this time, you will get continuous Medicare Part D coverage for your prescription drugs as long as you are on a prescription drug plan.
If you would like more information on the one-time rebate check, feel free to check out this brochure or call 1-800-MEDICARE. (Please note that you do not need to do anything to receive this rebate check and should not provide any personal information such as Medicare, Social Security or bank account numbers to anyone calling about the rebate.)
https://blog.medicare.gov/2010/08/09/what-is-the-donut%C2%A0hole/
Costs in the coverage gap
Most Medicare Prescription Drug Plans have a coverage gap (also called the “donut hole”). This means there’s a temporary limit on what the drug plan will cover for drugs.
Not everyone will enter the coverage gap. The coverage gap begins after you and your drug plan have spent a certain amount for covered drugs. In 2016, once you and your plan have spent $3,310 on covered drugs, you’re in the coverage gap. This amount may change each year. Also, people with Medicare who get Extra Help paying Part D costs won’t enter the coverage gap.
Brand-name prescription drugs
Once you reach the coverage gap in 2016, you’ll pay no more than 45% of the plan’s cost for covered brand-name prescription drugs. You get these savings if you buy your prescriptions at a pharmacy or order them through the mail. Some plans may offer higher savings in the coverage gap. The discount will come off of the price that your plans has set with the pharmacy for that specific drug.
Although you’ll pay no more than 45% of the price for the brand-name drug in 2016, 95% of the price—what you pay plus the 50% manufacturer discount payment—will count as out-of-pocket costs which will help you get out of the coverage gap. What the drug plan pays toward the drug cost (5% of the price) and what the drug plan pays toward the dispensing fee (55% of the fee) aren’t counted toward your out-of-pocket spending.
Example
Mrs. Anderson reaches the coverage gap in her Medicare drug plan. She goes to her pharmacy to fill a prescription for a covered brand-name drug. The price for the drug is $60, and there’s a $2 dispensing fee that gets added to the cost. Mrs. Anderson pays 45% of the plan’s cost for the drug and dispensing fee ($62 x .45 = $27.90).
The amount Mrs. Anderson pays ($27.90) plus the manufacturer discount payment ($30.00) count as out-of-pocket spending. So, $57.90 counts as out-of-pocket spending and helps Mrs. Anderson get out of the coverage gap. The remaining $4.10, which is 5% of the drug cost and 55% of the dispensing fee paid by the drug plan, doesn’t count toward Mrs. Anderson’s out-of-pocket spending.
If you have a Medicare drug plan that already includes coverage in the gap, you may get a discount after your plan’s coverage has been applied to the price of the drug. The discount for brand-name drugs will apply to the remaining amount that you owe.
Generic drugs
In 2016, Medicare will pay 42% of the price for generic drugs during the coverage gap. You’ll pay the remaining 58% of the price. What you pay for generic drugs during the coverage gap will decrease each year until it reaches 25% in 2020. The coverage for generic drugs works differently from the discount for brand-name drugs. For generic drugs, only the amount you pay will count toward getting you out of the coverage gap.
Example
Mr. Evans reaches the coverage gap in his Medicare drug plan. He goes to his pharmacy to fill a prescription for a covered generic drug. The price for the drug is $20, and there’s a $2 dispensing fee that gets added to the cost. Mr. Evans will pay 58% of the plan’s cost for the drug and dispensing fee ($22 x .58 = $12.76). The $12.76 amount he pays will be counted as out-of-pocket spending to help him get out of the coverage gap.
If you have a Medicare drug plan that already includes coverage in the gap, you may get a discount after your plan’s coverage has been applied to the price of the drug.
Items that count towards the coverage gap
- Your yearly deductible, coinsurance, and copayments
- The discount you get on brand-name drugs in the coverage gap
- What you pay in the coverage gap
Items that don’t count towards the coverage gap
- The drug plan premium
- Pharmacy dispensing fee
- What you pay for drugs that aren’t covered
If you think you should get a discount
If you think you’ve reached the coverage gap and you don’t get a discount when you pay for your brand-name prescription, review your next “Explanation of Benefits” (EOB). If the discount doesn’t appear on the EOB, contact your drug plan to make sure that your prescription records are correct and up-to-date. Get your plan’s contact information from a Personalized Search (under General Search), or search by plan name. If your drug plan doesn’t agree that you’re owed a discount, you can file an appeal.
https://www.medicare.gov/part-d/costs/coverage-gap/part-d-coverage-gap.html