Can You Tell Me What to Expect in The Part D Doughnut Hole?
Q: I read that the Medicare Part D doughnut hole is closing. What does that mean? I recently started on Lantus insulin, which my drug plan covers, but with the other drugs I take, I expect to hit the doughnut hole with my April refill.
A: You are fortunate to already be in a Medicare drug plan that covers Lantus because not all Part D plans do. If your drug plan had been one of the several Medicare Part D plans that doesn’t cover Lantus, this drug could cost as much as $340 per 100/ml vial. Many diabetics need about 3 vials per month to control their blood sugar, which would cost more than $13,000 over a 12-month period. But since you are in a plan that covers Lantus and presumably the other drugs that you take, here’s what to expect when you exhaust 2019’s Part D initial coverage limit of $3,820 in total drug costs, which includes what both you and your drug plan pays.
Once the costs that both you and your drug plan have paid exceed the above limit, then you will pay 25% co-insurance for brand drugs in 2019, and your drug plan will pay 5%. There’s a manufacturer discount of 70%. For generics, you will pay 37% and plans pay 63%. This phase of coverage — which is called the “doughnut hole” or coverage gap —lasts until you have a spent a total of $5,100 out-of-pocket on prescription costs. Please note that what you pay in premiums does not count toward out-of-pocket costs. Once you have spent $5,100, which counts the manufacturer discount portion of the drug cost in the doughnut hole, then you reach the Part D catastrophic threshold. Medicare pays 80%, plans pay 15% and enrollees pay the greater of either 5% of total drug costs or $3.40/$8.50 for each generic/brand-name drug respectively.
Assuming you might need 9 (100/ml of Lantus) every 90 days, here’s how the Medicare Drug Plan Finder shows typical costs: Please note this example is from the state of Virginia, and costs vary somewhat depending on where you may live.
- Initial coverage stage: $244.61 from the lowest-cost drug plan but, as you have discovered, the total cost of the drug is so expensive that you rapidly use up the initial $3,820 in the first three months once you factor in the portion that your drug plan pays.
- Doughnut hole or coverage gap stage: $305.76.
- Catastrophic coverage stage (if you spend a total of more than $5,100 counting all your prescriptions): $61.15
Unlike other types of health insurance, Part D plans do not have a fixed annual out-of-pocket maximum, and you could potentially continue to spend even more than $5,100 this year. While that’s a huge sum for just prescription drugs, the out-of-pocket threshold “re-sets” and it starts all over again next year. Unless Congress takes action, the out-of-pocket threshold is scheduled to make a steep increase in 2020 to $6,250, due to an expiring provision of the 2010 Affordable Care Act.
How much are you spending on prescriptions? Be sure to take TSCL’s 2019 Senior Survey and let us know. TSCL is working with Members of Congress to enact legislation that would allow Medicare to negotiate drug prices and supports bills that would cap or reduce out-of-pocket spending.