Medicare Part D Coverage Gap
Medicare Part D offers prescription drug coverage for anyone on Medicare. You don’t have to pass an exam and you can’t be denied coverage for health reasons. However, there’s an unpopular feature to this plan that may affect you, so you should get educated before you sign up. It’s called the Medicare Part D coverage gap, or the “donut hole,” and it can drastically affect your annual out-of-pocket costs.
What Is the “Donut Hole?”
Once you and your Medicare Part D plan have paid up to a certain amount for prescription drugs, then you’re responsible for 40 percent of the cost of brand-name drugs and 51 percent of the cost of generic drugs until you reach a certain limit. After your out-of-pocket spending exceeds another limit, you only have to pay five percent of prescription drug costs until the end of the calendar year.
The gap between the plan’s initial coverage period (up to $3,700 in 2017) and the catastrophic coverage limit ($4,950 in 2017) is called the “donut hole.”
The Four Stages of Medicare Part D Costs
There are four main stages of Medicare Part D coverage. Exact amounts of monthly premiums, annual deductibles, co-payments and co-insurance costs will vary based on which plan you choose.
Here’s how it works in a real-life example:
Mr. Jackson enrolls in a Medicare Part D plan and pays a monthly premium throughout the entire year.
In the first stage of Medicare Part D coverage, Mr. Jackson is required to pay for the full cost of all prescription drugs until he reaches his plan’s deductible. In 2017, no Medicare Part D plan can have a deductible over $400. There are some plans that have no deductible.
In the second stage, Mr. Jackson pays a co-payment for his prescriptions, then his insurance plan pays for the rest.
Once total prescription drug costs total $3,700, Mr. Jackson has entered the third stage: the coverage gap. He will now pay 40 percent of all brand-name drugs and 51 percent of generic drugs. Private drug manufacturing companies and the federal government subsidize the rest of the costs.
After Mr. Jackson’s total drug spending reaches $4,950, he will only pay five percent of drug costs until the end of the calendar year.
How Can You Avoid the Coverage Gap?
Not everyone with a Medicare Part D plan will be affected by the coverage gap.
If your annual drug costs total less than $3,700, you don’t have to be concerned. If you qualify for “Extra Help,” you will have full coverage year-round and may be eligible for a discounted premium or deductible. Supplemental coverage from the state or an employer may also subsidize your drug costs and erase your need for additional prescription drug coverage.
You can also avoid the Medicare Part D coverage gap by enrolling in a Medicare Advantage plan that may entail a higher premium, but will cover your extra expenses beyond the $3,700 limit.
Call My Senior Health Plan for detailed information on the Medicare Part D coverage gap and what you can do to lower your annual prescription drug costs.