You’ve probably already heard or experienced first-hand that prescription drug costs are on the rise. And if you’re looking into a Medicare plan that covers prescription drugs, like a
Medicare Advantage plan with prescription drug coverage or a stand-alone Medicare Part D (drug) plan, you may be aware that some Medicare plans offer better drug coverage than others.
But did you know that some plans include a coverage gap during which you’ll need to pay 100% of your drug costs out of your own pocket?
This gap, also known as the “donut hole,” can take a toll on your finances, especially if you need to use prescription drugs regularly. Below you’ll find more information on the donut hole, what it is and how it could affect you, as well as how Allsup can help you find the right plan to manage your drug expenses and possibly avoid the donut hole.
What Is the Donut Hole?
- The way Medicare drug coverage is structured, you’ll pay a portion of your drug expenses and your plan will pay the rest, up to a certain point ($2,830 in 2010).
- After the initial coverage limit is reached, the donut hole begins.
- During the donut hole, you’ll pick up 100% of the cost of your prescription drugs until you reach another threshold called “catastrophic coverage.” This threshold changes annually. In 2010, it is reached after your costs and the plan’s costs total $6,440.
- After you’ve reached catastrophic coverage, your plan will start covering a portion of your drug expenses once more – this time covering a much larger percentage of the cost (95%). Once you reach catastrophic coverage, the donut hole ends for the rest of the year, but you start all over again with the new year.
How Much Will You Have to Pay Out of Your Pocket?
Knowing how the drug portion of your Medicare coverage will work will help you determine whether or not you need a plan with donut hole coverage. Regardless of which plan you choose, all plans that offer Medicare Part D coverage, whether as a stand-alone drug plan or a Medicare Advantage plan with prescription drug coverage, need to offer drug coverage at least as good as the standard drug benefit Medicare has determined.
The following chart shows you what that standard benefit looks like, comparing your costs and your plan’s drug costs for 2010, excluding your monthly premiums.
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2010
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|
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You Pay
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Your Plan Pays
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Deductible
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$310
|
$0
|
|
Initial Coverage Limit
|
$630
(This is 25% of $2,520.)
|
$1,890
|
|
Coverage Up To Donut Hole
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$2,830
|
|
Donut Hole
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$3,610
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$0
|
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After Catastrophic Coverage Has Been Reached
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5% of costs
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95% of costs
|
|
(after total of $6,440 combined
has been paid by you and your plan)
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How Do I Secure Coverage During the Gap?
For some, falling into the donut hole can not only cause financial hardship, but also can result in poorer health, as some people are forced to choose between paying their basic living expenses and getting the treatment and prescription drugs they need. That’s why
managing your healthcare budget and finding the right Medicare plan – with adequate donut hole coverage - is so critical.
If you need to use your drug coverage frequently and think you may fall into the donut hole, you should be aware that there are ways to reduce the impact of the donut hole or avoid it completely. In addition to selecting a Medicare plan with donut hole coverage, you have other options: