If you’re planning to enroll in a Part D plan or already enrolled in one, it’s essential to know exactly how Medicare donut hole functions. Below, we have discussed how the donut hole works and how you can be prepared for it.
What is Part D Donut Hole, and How does it Work?
Donut holes are the gaps in Medicare prescription drug coverage. The beneficiary will be subject to a limit of Part D coverage. Once you’ve spent the amount specified in a prescription plan, you’ll be responsible for the cost that exceeds a certain amount.
Medicare Part D is structured into four payment stages and knowing them is essential for you to understand how the Part D Donut Hole works.
The four phases for each year are:
Annual Deductible: You have to pay that dollar amount (maximum $480 in 2022) before your plan begins to pay.
Initial Coverage: You are responsible for coinsurance or copays, usually a fixed amount. In this phase, a beneficiary pays 25% of the medications’ cost. Once you have spent a set amount of $4,430 in 2022, you will enter the next stage, i.e., Donut Hole.
Coverage Gap (Donut Hole): You will have to pay most or all of your medication costs once you’re in Donut Hole. However, it is not the case anymore; more about it below. Earlier, beneficiaries had to pay 100% of every drug’s cost; due to this, most people quit their medications. The Affordable Care Act came as a relief in 2012.
Catastrophic Protection: Once you have exited the Donut Hole, you will enter catastrophic coverage. You will pay whichever is higher in this coverage, i.e., copay or five percent of a drug’s cost. However, the copay varies for generic and brand-name drugs.
Here’s the minimum copay for both in 2022;
Generic drugs: minimum copay is $3.95,
Brand-name drugs: minimum copay is $9.85
There is no cap or maximum amount on how much one will pay. However, the costs are adjusted once the year ends, and the new cycle begins.
Isn’t the Medicare Part D’ Donut Hole’ Closed?
The answer is both ‘No’ and ‘Yes.’ Before 2020, if you had reached your coverage gaps, you’d have to pay 100 percent of the cost for prescription drugs until you reached thresholds for spending.
In 2010, when the Affordable Health Care Act was enacted, it contained an incremental “closing” of the donut hole. However, “closing” does not mean that those who have reached the donut hole will not have to pay for their medications. Instead, it implies that insurance plans and pharmaceutical companies pay for more of the cost. Like in the initial coverage period, you will be responsible for paying for 25 percent of the cost of your medication.
You are in the Catastrophic Coverage period after paying $7,050 in 2022 on prescription drugs. As discussed earlier, you’ll be charged five percent of the price for all of your medications which is $3.95 for generics and $9.85 for brand-name medications (whichever is higher).
How Can I Avoid the Part D Donut Hole?
Here’s how to completely clear from the donut hole and receive financial assistance if you fall into the gap.
It’s crucial to research to find the most suitable health plan that meets your requirements. The annual enrollment period for Medicare Advantage and Part D plans runs from October 15 to December 7. During this time, individuals covered by Medicare can enroll, switch or quit plans.
Check out the Part D plan checklist to find the questions you should inquire about before deciding on the coverage for prescription drugs. In addition to looking at the costs and benefits, you should ensure you select the plan that covers all or most of your medication.
Outside of the Annual Enrollment Period, you could be eligible for an enrollment period special to change drug plans when you meet certain conditions, such as changing or losing your other coverage plans.
If you are a person with a limited income and resources, you might consider determining whether you are eligible for Medicare’s Extra Help/Part D Low Income Subsidy. Individuals who qualify for Extra Help see significant savings on their prescription plans and medication and don’t fall into the donut pit.
There are many ways to reduce your prescription drug costs. For example, some pharmaceutical companies sell their products at a discounted price directly to the consumer or via doctors’ offices. However, it is more prevalent with specialty and brand-name medicines, which are costly.
Talk to your doctor or health service provider before receiving the prescription for the medicine to see whether discounts are offered or if they have any assistance programs for prescriptions. It is also possible to search on the internet for the drug’s manufacturer’s website, which might have additional information.
If you’re planning to enroll in a Medicare prescription drug plan, we can help you make the right choice. Schedule a call with our licensed agents specializing in Medicare now!