Medicare Doughnut Hole - What Is It?
By Carol Eustice. Arthritis & Joint Conditions Expert
Carol, About.com's Arthritis Expert, was diagnosed with rheumatoid arthritis in the prime of life, at age 19. Carol's late husband Rick, who was her co-expert on About.com and partner in every way, also had rheumatoid arthritis.
Updated March 07, 2014.
Some Enrollees Are Hitting the Medicare Doughnut Hole
In the first round of Medicare Part D sign-ups, some states offered more than 40 different plans from which to choose. Medicare representatives and a Medicare Prescription Drug Plan Finder on the Medicare.gov website attempted to help enrollees decide which plan was best for their needs. Even so, many enrollees ended up not fully understanding how their plan would work.
Many enrollees are shocked when they hit the Medicare doughnut hole (or gap in coverage) and are unsure how they got in the hole or when they will come out of it.
Medicare Part D providers are required to mail monthly statements so enrollees can follow along. It is difficult to grasp even with a monthly statement unless you completely understand how your plan works.
What Is the Medicare Doughnut Hole?
Medicare Part D enrollees pay a co-payment amount for their prescription drugs as determined by their specific plan. For standard plans, enrollees pay their co-payment until their total drug cost reaches $2250. In the initial coverage phase, the enrollee pays a co-pay amount and the drug plan pays the rest of a discounted drug price.
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The total drug cost is the co-pay amount paid by the enrollee plus the amount paid by the Medicare Part D drug plan. (Note: The amounts in this article may change every year.)
After $2250 in total drug costs is reached, there is a gap in coverage (the "doughnut hole") and the enrollee must pay the full cost for their prescription drugs until they have paid $3600 out-of-pocket expense. (It has been erroneously reported that the $3600 out-of-pocket expense is in addition to what has been paid out-of-pocket towards the initial $2250. Actually, what has been paid out-of-pocket during the initial coverage phase also counts towards the $3600.)
After total true out-of-pocket (TrOOP) expense equals $3600, enrollees reach "catastrophic coverage" and their cost per drug drops to a small co-pay (usually $2 or $5) or 5% co-insurance, whichever is greater. During
the period enrollees are in the coverage gap or doughnut hole, they must still pay their monthly premium.
Do All Plans Have a Doughnut Hole?
Some plans charged a higher monthly premium so as to provide more coverage during the gap which occurs in many plans. When deciding which Medicare Part D prescription drug plan to choose, enrollees have to consider:
- Is there an annual deductible?
- What is the monthly premium?
- What drugs does the plan cover (formulary drugs)?
- Are your usual maintenance drugs available as generic drugs or are they covered at a higher tier cost for brand-name drugs?
- Is the pharmacy you use in the network of available pharmacies for that plan?
- What is the initial coverage, annual coverage gap, and catastophic protection for that specific plan?
- Is additional assistance available because of low or limited income?
How Does Medicare Explain the Doughnut Hole?
"If you have high drug costs, you may consider which plans offer additional coverage until you spend $3,600 out-of-pocket. In some plans, if your costs reach an initial coverage limit, then you pay 100% of your prescription costs. This is called the coverage gap. This "gap" in coverage is generally above $2,250 in total drug costs until you spend $3,600 out-of-pocket. Some plans might offer some coverage during the gap. Even in plans where you pay 100% of covered drug costs after a certain limit, you would still pay less for your prescriptions than you would without this drug coverage", according to Medicare.gov.
Points to Remember
- Know if your Medicare Part D prescription drug plan has a coverage gap (Medicare doughnut hole).
- Know when you will go into the hole and when you will come out of the hole.
- On your monthly statements from your Medicare Part D provider, follow the Cost Of Your Presciption, Amount Paid By Your Plan, Amount Paid By You.
- Having Medigap coverage or having Medicare Advantage may impact your decisions about Medicare Part D.
- Understand your plan and follow along so you will not be surprised by how it works and so mistakes can be averted.
Medicare Prescription Drug Coverage, Medicare.gov
AARP Medicare Rx Plan Handbook, 2006
Medicare Doughnut Has $3600 Hole, Tony Pugh, May 31,2006, Kansascity.comSource: arthritis.about.com