Medicare Part D – Policy costs and the donut hole

To continue with our discussion of Medicare Part D prescription drug coverage, this article will discuss the costs of Part D and the coverage gap, also called the “donut hole.”

Policy costs

Premiums:

There are many factors that will influence the cost of your Part D coverage. They will vary depending on the types of drugs you use and whether or not your plan covers them. The type of plan you choose is another variable, as is the pharmacy you use and whether or not it is part of a network. There will be a monthly premium that you pay, in addition to the premium that you pay for your Medicare Part B. If you belong to a Medicare Advantage plan that includes prescription drug coverage, then your prescription drug plan costs will be added to the plan’s monthly premium.

Deductibles and copayments:

Most prescription drug policies require the insured to pay an annual deductible of up to $310. After you have paid the deductible, you are then required to pay a copayment on your prescriptions until the combined amount paid by you and the insurance plan comes to $2840. Once you have reached a total of $2840, you are then in what is called the coverage gap, or the donut hole. This is a temporary limit on what the drug plan will cover for your prescription drugs.

Coverage gap or donut hole

As stated previously, you enter the coverage gap or donut hole once you and your insurance company together have spent over $2840 in one calendar year. Once you are in the donut hole, you are then responsible for the total cost of your prescription drugs until your drug coverage kicks in again. In 2011, covered individuals paid 50% of the cost of name-brand prescription drugs and 93% of the cost of generic drugs while in the coverage gap. These costs will drop in subsequent years until by 2020 participants will be paying no more that 25% of the cost of their prescriptions while in the gap.

You are able to get out of the gap when the total amount spent reaches $4550 (in 2011). This includes the pre-gap payments of $2840, plus $1710 paid on prescription drugs while in the gap. When calculating the $1710 spent while in the gap, the actual cost of the name-brand drugs is counted toward the total, not just the 50% discount. Once an individual has reached the $4550 limit, then catastrophic drug coverage kicks in.

Catastrophic drug coverage

With catastrophic drug coverage, the prescription drug plan will cover 95% of the remaining drug costs for the rest of the calendar year. Then it begins all over again.

Some Part D plans do offer additional gap coverage that will cover generic drugs while in the gap, but these plans will have a higher monthly premium. Qualified individuals can also apply for Extra Help. This is a program for people with limited income and resources provided by Medicare and Social Security. You would apply for Extra Help at your local Social Security office.

 

Sources used in this article:

http://www.medicare.gov/navigation/medicare-basics/medicare-benefits/part-d.aspx#msip

http://www.medicare.org/medicare-basics/part-d.html

http://www.aarp.org/health/medicare-insurance/info-11-2009/part6_enrolling_in_Medicare_partd.html

http://www.kff.org/medicare/upload/7044-12.pdf

 

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