The Part D Coverage Gap (Donut Hole)
The Part D coverage gap is also referred to as the donut hole. While somewhat confusing, it is important for Part D plan holders to understand how it works because it can greatly impact the out-of-pocket expenses associated with prescription drug coverage.
What is the coverage gap?
The coverage gap is part of every Part D plan. Put simply, it is a “gap” in prescription drug coverage where the member will pay more for prescription drugs.
How does the coverage gap work?
Medicare beneficiaries will find themselves in the coverage gap when the plan’s initial coverage limit has been met – when the total prescription costs reach $4430.
Once in the donut hole, beneficiaries will receive a 75% discount on name-brand drugs and a 63% discount on generic medications. While this seems like a significant discount, the member’s out-of-pocket portion will be much higher than before they were in the coverage gap.
The coverage gap remains in effect until the member has paid $7050 for prescription drugs. At that point, catastrophic coverage begins. Once in catastrophic coverage, the member is only responsible for 5% of the prescription cost. This lasts until the end of the year.
Items that count towards the coverage gap are the yearly deductible, coinsurance, copayments, and the discount you get on brand-name drugs in the coverage gap. What you pay in the coverage gap is also relevant.
Items that don’t count toward the coverage gap would be the drug plan premium, the pharmacy dispensing fee and the amount you would pay for drugs that aren’t covered.
Tips to Avoid the Medicare Part D Coverage Gap
Sometimes there is simply nothing that can be done to avoid the coverage gap. However, there are a few things that members can try to avoid the donut hole.
First, be sure to have your drug plan reviewed every year. While it may work great in the current year, the upcoming year’s changes could mean that you find yourself in the donut hole next year, even though your medications didn’t change.
Second, use generic medications whenever possible. This will help extend the life of your initial coverage limit.
Third, compare prices across pharmacies. Each drug plan will have a list of pharmacies that are preferred, meaning that those pharmacies will generally offer lower prices than standard pharmacies. Using a preferred pharmacy will decrease your out-of-pocket expenses for prescription medications.
Fourth, try using mail-order medications or ordering your medications online. Sometimes this comes with a discount.
Fifth, call the drug manufacturer directly and ask for a discount or coupon. Many times, they will give these to consumers who ask for them.
Lastly, you can apply to the Extra Help program. This program offers financial assistance with Part D premiums, deductibles, and copays.
Part D Straddle Claims
A Part D straddle claim is one in which the medication “straddles” two coverage phases. For example, if you have $5 left in your initial coverage phase, but the medication is $10, that medication is a staddle claim since it actually puts you into the next phase of coverage, the donut hole.
In this case, the individual’s expense is not clear. When this happens, the plan will calculate what the individual owes using the coverage gap discount and the dispensing fee for the prescription.
Medicare Advantage Drug Plans and the Coverage Gap
Medicare Advantage (Part C) plans that include prescription drug coverage still include the traditional coverage gap. However, a Medicare Advantage plan may still cover some of the generic medications while in the coverage gap. If it does, payment for those generic medications does not go towards the total out-of-pocket expense to get out of the coverage gap and into catastrophic coverage.
Coverage Gap Prescription Assistance
Medicare offers the Extra Help program for individuals with low incomes and who meet certain requirements. The program is offered individually through each state and can help pay for some or all of an individual’s prescription expenses while in the coverage gap.
If the individual is not eligible for the Extra Help program, they can also speak to their medical provider about switching to different medications. While this is not always possible, there may be times when a cheaper medication is an option. Of course, you and your doctor will need to decide if that medication is just as effective.