Ask The Advisor: December 2015

Ask The Advisor: December 2015

Why Did I Hit The Doughnut Hole?

Q: I recently hit the Medicare Part D doughnut hole for the first time since I enrolled in Medicare in 2010, but I still take the same medications that I did when I first enrolled. My wife and I were surprised by how high the costs are because we thought the doughnut hole was “closed” through the Affordable Care Act. Is this right?

A: A well-publicized provision of the Affordable Care Act purportedly “closed the Medicare Part D doughnut hole ” or coverage gap. But that’s a misnomer. Beneficiaries are still on the hook for thousands of dollars in out-of-pocket drug costs every year and that amount is projected to grow.

More people are hitting the doughnut hole or hitting it sooner, even when there’s been no change to their prescriptions. That’s due in large part to recent outrageous price spikes in the retail cost of prescription drugs. The price spikes are hitting common older generics in addition to specialty, and newer brand drugs.

In 2016 the Part D initial coverage amount will increase to $3,310. It’s the full cost that both you and your drug plan pays that burns through your Medicare Part D initial coverage amount, not just the amount that you pay out-of-pocket. Let’s say you pay just $5 for generic prescriptions. But due to recent price spikes your formerly “cheap” generic now retails for $475. Your drug plan generally negotiates a discounted price — like $375, which leaves the plan covering $370. If you refill the drug monthly, and assuming you take no other drug, you risk hitting the doughnut hole in August of 2016. Once in the doughnut hole you will owe 58% of the cost of generic drugs covered by your plan or about $ 217.50 each month through the rest of the year until you spend a total of $4,850 out of pocket.

 

Here’s a look at how the basic Part D benefit is structured in 2016 from the Medicare & You handbook.

 

 

Monthly premium Varies considerably by drug or health plan. Comparing plans based on the drugs you take is very important since not all plans cover the same drugs. Money spent on premiums is not counted toward your total out of pocket spending. (national average)

 

$32.50 per month

Deductible

 

The amount you must pay before your coverage starts. This varies according to your plan. Some plans have no deductible.  

$360

Initial coverage amount The amount you and your drug plan spend on covered drugs. You pay a copayment that varies considerably by plan. This amount includes the deductible.  

$3,310

Coverage gap “doughnut hole” Once you and your drug plan have spent $3,310 you hit the coverage gap. In 2016, you pay 45% of the plan’s cost for covered brand-name drugs and 58% of the plan’s cost for covered generic drugs. $4,850

(Total you must spend out-of-pocket.)

Catastrophic coverage Once you have spent $4,850 out-of-pocket for the year, you pay only a coinsurance or copayment for each covered drug until the end of the year.  

For more information visit www.Medicare.gov or call 1-800-MEDICARE (1-800-633-4227).

 

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