Medicare Part D explained-How To Avoid Donut Hole?

Medicare Part D

Most Medicare beneficiaries are often confused about their Medicare Part D coverage and how it actually works. You’ve heard the expression “donut hole” but are not sure what it really means.

Don’t worry, because you are not alone. To help you avoid any confusion as Medicare beneficiaries we will explain how part D works and what things you need to know before enrolling. So, if you are planning to get Part D or already have one but are not sure how it’s working, you’ve come to the right place. So, let’s dive into it. 

How Do I Get Medicare Part D?

Medicare Part D is also known as a drug prescription coverage plan. You can enroll in it either through a stand-alone Medicare Part D Prescription Drug Plan or Medicare Advantage Plan (Part C) that includes prescription drug benefits. No matter what type of coverage you choose it would be almost the same.

Medicare Part D Coverage Phases 

Medicare Part D has different coverage levels and phases.  It is important to know that Medicare Part D plans renew every calendar year so they are resetting every January 1st, including the phases. Most Medicare beneficiaries will get to one or two phases in the given year before it renews. 

Phase 1: Deductible 

This is the amount you’ll have to pay out of your own pocket before the insurance kicks in. In other words, you’ll be responsible for the full cost of your medications until you’ve met the plan’s deductible before the part D plan kicks in. For 2022, the maximum part D deductible is 480$ per year. However, some Part D plans have lower deductibles, and some beneficiaries even have a zero-dollar deductible. Also, in most cases, if you using only Tier 1 and Tier 22 medications it is possible that deductibles may not even affect you. 

In most cases, if you are using Tier 3 or higher medications, you will likely be responsible for the full costs of that medication at the pharmacy before your drug coverage starts. 

As already mentioned, it’s important to remember that deductibles as well as drug prescription plans are subject to change every calendar year (January 1st).

Phase 2: Initial Level Coverage 

When you are in the Initial coverage phase you will pay a set of copays or coinsurances that are established by your prescription drug plan (for your specific medications).  The amount you pay will depend on which tier of medicine falls under and the tiers are set up under the drug plan. Plans can vary from one plan to another. This means that tiers can vary from plan to plan, so the best option for you is to use your list of drugs to find the best drug plan every year based on your specific medication needs. 

Phase 3: Coverage gap or “Donut Hole”

The most common question is “ when do I reach the coverage gap”? so let’s answer it. A coverage gap or “donut hole” comes after certain spending thresholds and the dollar amount of the threshold spending can change. In 2022, the spending threshold is 4430$ and that is the spending limit that you get into the coverage gap. In other words, after the full retail amount of cost for your medications reach this limit, you fall into a coverage gap.

 For example, you went to the pharmacy and paid a certain amount for some medication and your insurance company paid for the rest of the amount. When you and your insurance company reach the limit of 4430$ in one year you will automatically fall into a coverage gap.

When you are in the coverage gap you will have to pay 25% of the cost of your medications and that comes off the price that your insurance company has established whit the pharmacy you use for that medication.

For example, you need a medication that costs 300$ and in the coverage gap, you will need to pay more for the same medication than in the initial phase. Because 25% of the cost from 300$ is 75$.  The scenarios that can get you into a coverage gap are any amount you’ve paid towards your deductible, the full retail costs of medication in the initial phase, etc.

Costs like monthly premiums, and not covered medications ( medication that falls under out-of-network pharmacy) can’t get you in the coverage gap because those costs don’t count. 

medicare part D prescription drugs
How To Avoid The Donut Hole?

Nobody is ever happy to get to phase 3 and enter into a coverage gap. But, you don’t have to worry because really a small number of beneficiaries enter this phase in one calendar year (remember that plan renews every January 1st). To avoid falling into a coverage gap shop prescription drug plans every year ( because each year some medications can fall into different tiers) and for some generic medications, you can pay cash because the costs are lower (those costs don’t count into the spending threshold). You can always choose a new prescription drug plan during the open enrollment period which happens every fall from October 15th and December 7th.

Phase 4: Catastrophic coverage

In 2022, you will reach a catastrophic phase of coverage once you’ve spent a total amount of 7050$ out-of-the-pocket costs. In other words, to get catastrophic coverage, Medicare will only count the costs that are under your TrOOP or “True Out of Pocket Costs”. Here are some examples that are considered as your TrOOP:

  • Any amount you have paid into your deductible 
  • Copays or coinsurance you paid for during your initial level phase of coverage 
  • Almost the full cost of the brand-name drugs that you purchased during the coverage gap 
  • For generic drugs, it counts the amount you paid for medications in the coverage gap, not the full amount 

However, if you ever get to this stage your prescription drug costs usually go down because when you reach this phase you’ll be responsible for 5% of the cost of your medications.

Part D prescription drug plans really can be confusing for Medicare enrollees. If you are still not sure which one should you choose, and have more questions about Part D coverage our Medicare agents can help you.

You don’t need to do this alone, our agents in Missouri Insurance Advisors have a lot of experience in the Medicare world. Call us or text us today and we will help you choose the best prescription drug plan on the market that suits your specific medication needs and fits your budget! 

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