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What is the Medicare donut hole?

Just the essentials...
  • The Medicare “donut hole” is a time period that you will have to pay up to 45 percent of your prescriptions yourself
  • This is known as Medicare (Part D) coverage but leaves the patient to pay out-of-pocket during the gap period
  • By selecting a good private insurer who helps you manage this expense, you will save money and get out of the gap faster

For those who are eligible for Medicare or for who may soon be eligible for Medicare, it is important to understand what is meant by “the Medicare donut hole.”

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The Gap is Only About Medications; Not Healthcare

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This phrase does not involve your major medical insurance directly except when it has to do with prescription medication costs. Some people new to the Medicare system are afraid that it means that they will not be covered with their basic expenses. Such is not the case.

You will still be covered with all of your normal medical expenses, including doctors’ visits, tests, follow-ups of any ongoing medical conditions, and other treatments. What will not be covered are your prescription drugs.

The “donut hole,” is that period of time in which you, as the consumer, must pay for your own prescription drugs out-of-pocket because it is not covered by your insurance plan. This is also known as The Medicare Part D coverage gap.

So keep in mind that it is a part of the Medicare Part D category and does not affect whether you receive other Medicare benefits. But prescription medication costs are so high nowadays that it can be devastating for consumers who are forced to pay for such medications, even for a relatively short period of time.

How do I know when I’m about to reach the donut hole?

You can contact your insurance provider who can let you know when you are within a month or so of reaching the donut hole. That way, you will be able to have a reasonable amount of time in which to plan so that the cost of paying out-of-pocket is manageable.

How much money are we talking about?

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The key to handling the coverage gap (donut hole) is to get out of it. That is the goal when you are in it so that you can resume getting help with your prescription drug costs. The amount of money in TrOOP (True out-of-pocket expense), can range from $750 to $3,600.

The first $750 of this expense comes from what is known as the “$250 deductible phase.” The Center for Medicare and Medicaid Services covers up to 75% of the next $2,000 in costs for drugs.

You Pay up to 45 Percent

Think of the donut hole as a period of time that you are trapped without prescription drug coverage but the way to get out is to continue to purchase your medications at the reduced rate.

When you are in the donut hole or gap for Medicare, you will have to pay up to 45 percent of the total costs of your prescription medications.

You will not have to pay the entire amount, but it still causes some financial hardship for those taking multiple medications.

This is why it is so important to pool your resources and compare independent and private insurance companies so that you are able to afford your prescription medications even when you find yourself in this “no man’s land” for prescription drug coverage.

How do I know if my insurance has a donut hole or gap in coverage?

It’s safe to say that most Medicare Prescription Drug Plans have a gap in coverage at some time during the year. When you reach this, you will need to have a plan for dealing with the expense.

Will everyone enter the gap period?

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One thing to keep in mind, however, is that not everyone will enter the coverage gap. The coverage gap could be considered “upside down deductibles.”

This is because you have to spend a certain amount of free coverage for your prescriptions before you will be faced with having to pay for your own at the 45 percent amount.

So, in 2016, for example, once you and your plan have spent around $3,310 on covered medications, you will be in the coverage gap.

The Good News About the Donut Hole

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Despite the fact that you are going to have to pay some serious out-of-pocket expense while you are in the donut hole or Medicare gap, there is good news.

While you only will pay 45 percent of the total cost of your prescription drugs, up to 95 percent of the actual cost of the drug is counted toward your spending record to get you out of the donut hole.

So anytime you purchase or renew your prescriptions, 95 percent of the cost will be counted, even though you are not paying more than 45 percent of the cost of the drugs.

This is like having to pay $1 but getting back 95 cents. The only problem is that you do not get it back. You only get credit for it until you are out of the gap.

Special Circumstances for Medicare Patients

There are some special situations which will keep some people out of the coverage gap. One of those is that you simply may not take enough medications to reach the coverage gap.

For example, if your total drug cost within a given year is only $2000, then you would never enter the gap in coverage.

Also, if you have special circumstances where you are receiving additional aid to help you pay your Medicare expenses (Part D), you would not enter the coverage gap either.

Brand Name and Generic Drugs

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One way that you can save additional money when you are in the gap in coverage is to opt for generic drugs in the place of brand name medications. Most people believe that there is no difference in strength or effects of drugs that are purchased in the generic category but some patients prefer to hold out and purchase brand name drugs.

Brand name medications are always going to be more expensive than generic drugs because they tend to be bought and processed by the biggest pharmaceutical companies.

Do Your Homework

One thing you can do to thwart some of the costs of your prescription drug costs is to research the costs of both brand name and generic drugs. By comparing the costs of both, you can also learn the names of the generic version so that you can choose to purchase the generic drugs while you are in the gap if you want to do so.

Updates to the TROOP

In 2010, the amount of the total true out-of-pocket expense for prescription drugs increased to $4,550. This amount increases yearly.

You need to ask your insurance company agents what the cap currently is when you are shopping for health insurance gap coverage or supplemental insurance.

Once you reach the $4,550 amount in out-of-pocket expense, you will be eligible for the next step, which is “catastrophic coverage.”

What does catastrophic coverage mean?

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When you reach the amount that is considered the end of normal coverage, you enter what is known as “catastrophic coverage.” This entitles you to get all of your prescription drugs paid for at that point and takes you out of the donut hole.

The catastrophic coverage category is reserved generally for people who have a catastrophic illness such as severe heart

Most people will not normally reach this status unless they take multiple medications which are very costly at the same time.

What is meant by “total drug spend”?

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Total drug spend is the total retail cost of the drugs, regardless of how much out-of-pocket expense you have actually incurred or where you are at in the gap.

For example, if your medications are normally $500 per month and you are in the gap period, you would pay only up to 45 percent of this which would equal $225 for that month.

But, for every month that you pay the 45 percent, it would be recorded as paying 95 percent or $475. This is designed that way on purpose and helps you get to the point of getting out of the donut hole faster.

Why You Need Supplemental Coverage

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Medicare is great for major medical expenses, hospital stays, tests, and referrals. It is there when you need it for surgeries and ongoing health conditions. It is a system that has worked quite well for people who are 65-years-of-age or older for a long time. But one thing it does not do is pay for continued prescription costs past a certain amount.

In other words, you can max out of what will be covered by Medicare and be forced to pay out-of-pocket for up to 45 percent of it.

But the good news is that there are many private insurance companies who have come to the rescue for people who reach the end of their coverage for prescriptions during this gap period.

By choosing an independent insurer for the time period that you are in this gap, you can save more money and get help if you cannot afford the costs that are laid on you by this gap period.

How to Eliminate the Donut Hole

By paying somewhat higher premiums, you can sometimes even eliminate the donut hole completely. This is not always possible and it depends on the amount of drugs you have to take and other factors regarding your medical coverage.

The key is to shop around and compare your coverage and your current prescription costs with what you’d be paying with such gap coverage.

Dual-Eligible Patients Rule

There is also another way you may not have to be placed in the gap period. If you are defined as “dual eligible” by the Medicare system, you would not be subject to the gap period and this would not affect you.

Patient Protection and Affordable Care Act of 2010

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In 2010, Congress passed the Patient Protection and Affordable Care Act of 2010. What this did for patients is that it took people whose expenses took them into the donut hole and gave them a $250 rebate within three months of reaching the gap to help cover the costs of out-of-pocket expenses. For people with only minor medications or a small number of medications, this was very helpful.

For those with higher amounts of drugs that they must take each day to survive, it doesn’t help much. Even 45 percent of $3000 is too much and can create serious financial distress for the people that it affects.

It is rumored that the donut hole may be completely phased out by the year 2020 but as of right now, it still exists.

The Medicare coverage gap (also known as Part D Medicare) plan causes a great deal of hardship on some older patients and those suffering from catastrophic illness. But supplemental insurance is often the answer that offers the temporary relief needed to scrape through this period.

Which company should I choose?

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When shopping and comparing insurance regarding the Medicare gap coverage for prescription drugs, you will need to do your homework to determine which one is best for you.

No one solution is ever best for everyone, but researching the coverage plans of various companies, you will be at an advantage by knowing what is available when you do reach this gap period.

Tips in Handling the Gap Period

If you are approaching the donut hole or gap period in your Medicare coverage, here are some tips that we recommend you do so that it will not be such a financial burden on you.

– Plan Ahead

By thinking and planning ahead when you are getting close to the gap period, you will be at a better advantage to handling it. Being taken by surprise as you reach the gap period is one of the worst things that can happen. So make sure you look at what is available long before you reach this critical time.

– Shop Around

Shopping around for a supplemental insurance policy is going to be high on your list when you enter the gap period. But actually the best time to do this is not when you enter the gap. It is before you enter the gap.

By comparing and shopping around before you hit this crucial period, you will end up saving yourself a great deal of trouble and money.

That’s why our site can benefit you by allowing you to get down to the important things that you require of your insurance and drug prescription plan. So count up the amount that you would be paying once you hit the gap and see if you can find a company that can lower your costs.

– Consider Generic Drugs

 

If you are not particular about purchasing generic drugs instead of your standard brand name drugs, you can save a substantial amount of money by doing this.

Check with your doctor or pharmacist first if you have reservations about changing to the generic brand and make sure you also know the name of your generic brand so that you’ll know what to ask for.

– Have a Savings Account of Your Own for Your Prescriptions

Just because the government does not allow you to have a formal HSA account once you are in the Medicare system does not mean that you cannot create your own HSA.

One tip is to stash away a certain amount of money every month specifically for your out-of-pocket drug expenses so that it won’t be as expensive once you are in the gap.

– Look into Supplemental Insurance Plans

Supplemental insurance plans that offer help in paying your prescription drugs can be highly beneficial to you as you stretch through the gap period. Shop and compare costs and ask if paying more on your premium could help you avoid the gap altogether.

HSAs: Medicare Patients Not Eligible

The New York Times reported last year that patients who are enrolled currently in Medicare are not eligible to contribute to HSAs (health savings accounts). So this means that, if you are approaching the gap in coverage in your Medicare plan, this is not an option for you.

But, as we stated above in our list of tips to Medicare recipients, you can always create your own HSA by allocating a certain amount of money toward your prescription drugs each month on your own.

Starting a savings account before you reach the age of eligibility is also a great idea so that the money will be there when you need it most.

When Approaching Eligibility Status

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For someone approaching Medicare age, however, it could be a good temporary solution if you are entering the Medicare program at age 65. Any monies that you contributed to the HSA prior to your 65th birthday or date of Medicare eligibility, can still be taken out and applied to any out-of-pocket expense.

We didn’t want to fail to remind those who are 64 years of age and approaching Medicare age to consider taking out an HSA prior to your Medicare eligibility.

This is a lot of information, we know. Sometimes, despite the amount of information you have, it still seems complicated.

That’s why we developed this insurance site — to give you access to some of the best health insurance companies out there.

With any financial situation, it’s always best to plan ahead. One of the steps in doing that is to shop for coverage where you can get free quotes and help in making an educated decision. So if this information is not enough, feel free to opt for a free quote from one of our many providers and ask the questions yourself.

As we’ve said many times before: there is no one plan that meets everyone’s needs. Your health care issues are as unique as you are. So shop around and compare until you find the plan for gap coverage that you need.

What to Look For

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When shopping and navigating our site for Medicare insurance specialists, what you will want to look for is a company that specializes in supplemental Medicare insurance.

You may want to ask different companies to tell you how they can help with your prescription drug plan if that is something that affects you.

Paying out-of-pocket expenses for prescription drugs can easily run into thousands of dollars and for some people, this is devastating. So, look ahead and have an independent insurance agent help you determine what you should do to stay ahead of the gap.

Coffee with Your Donuts

We hope that this information will help you to make an educated decision on how to plan for the gap period if you are one that will be affected by this. Think of supplemental insurance like a warm cup of coffee that will help make the donut hole much more satisfying and less painful.

Donut Holes are Only Temporary

Remember that the “donut hole” or Medicare gap is only a temporary state. You will not be in it forever. You should also never quit taking any medication outside of the advice of your physician, as this can be highly detrimental on your health!

Instead, look around for alternatives long before you reach the gap period. And remember that the gap period is only temporary and donut holes don’t last forever. In fact, with a little coffee, they melt away quickly.

Enter your zip below to start finding the coverage you need to fill in the Medicare gap.

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MedicareInsurance.com is privately owned and operated. MedicareInsurance.com is a non-government asset for people on Medicare, providing resources in easy to understand format. The government Medicare site is www.medicare.gov.

This website and its contents are for informational purposes only and should not be a substitute for experienced medical advice. We recommend consulting with your medical provider regarding diagnosis or treatment, including choices about changes to medication, treatments, diets, daily routines, or exercise.

This communication’s purpose is insurance solicitation. A licensed insurance agent/producer or insurance company will contact you. Medicare Supplement insurance plans are not linked with or sanctioned by the U.S. government or the federal Medicare program.

MULTIPLAN_GHHK5LLEN_Accepted Last Updated 3/18/2018