What's Medicare Part D Coverage Gap (Donut Hole) And How to Survive It.
- Ricky Rakib
- Feb 2, 2021
- 3 min read
Updated: Feb 4, 2021
It is critical for those on Medicare to understand how Medicare Part D Coverage Gap (also known as Donut Hole) works. I'm going to explain in easy terms how it works and what you can do about it.
Not everyone will enter the "Coverage Gap"; however, you probably will experience this if you take expensive brand name medications. In 2021, The coverage gap begins after you and your Medicare insurance drug plan have spent $4,130 on covered drugs. At which point you enter the "coverage gap." in 2021, you're in the coverage gap. This amount may change each year.
Brand Name Drugs
Once you reach the coverage gap, you'll pay no more than 25% of the cost for your plan's covered brand-name prescription drugs. (Drug manufacturer pays 70% (discount), and your plan (insurance carrier) pays the rest of the 5%.
Dispense Fee
There is also a dispensing fee. Your plan pays 75%, and you pay 25% of the fee.
Out of Pocket Expense
What you pay (25%) + What the manufacturer pays (70%) = 95% counts towards the out-of-pocket expense. The 5% cost that manufacturer pays + 75% of the dispensing fee is NOT counted towards the out-of-pocket expense.
For Example
Let's assume in 2021 that you and your plan have paid $4130; at this point, you enter the "coverage gap." You go to your pharmacy to fill a brand name drug. The price of the drug is $100 + $2 dispense fee = $102. You will be responsible for 25% of the cost of $25.50. This $25.50 + manufacturer’s discount of 70% ($100x.70) = $70 or $95.50 counts towards out-of-pocket expenses.
Generic Drugs
Medicare will pay 75% of the price for generic drugs. You'll pay the remaining 25% of the price. The coverage for generic drugs works differently from the discount for brand-name drugs. Only the amount you pay will count toward getting you out of the coverage gap for generic drugs.
For Example
In 2021 (at some point), you and your plan (insurance carrier) have spent $4130, at which point you enter the 'Coverage Gap". You go to your pharmacy to fill a generic prescription drug. The price of the drug is $20 + $2 dispense fee = $22. You will be responsible for 25% or $5.50. Only your $5.50 counts towards out-of-pocket expenses.
Out of Coverage Gap
Once your yearly out-of-pocket expenses reach $6,350, you are out of the coverage gap and enter the Catastrophic Coverage phase. In this stage, you pay a small co-pay or co-insurance for your prescriptions.
The following link is an illustration from Aetna:
Key Issue
Like many of my customers, many seniors can't afford the coverage gap of $6,350 out of pocket expenses. If that's you, the following recommendations can help.
Step # 1: Apply for Medicare "Extra Help," a program to help you pay drug costs for seniors with limited income and resources.
Step #2: If you get approved, that great. Suppose you don't get approved (due to income being over the threshold), save that letter and file for an appeal (instructions will be on that letter on how to file an appeal or online https://www.medicare.gov/claims-appeals/how-do-i-file-an-appeal). You want to make a case by providing your monthly expenses showing you can't afford the coverage gap of $6,350.
Step#3: In the meantime, find out if your state offers any help. Online at https://www.medicare.gov/pharmaceutical-assistance-program/#state-programs
Step # 4: Drug manufacturers often help. To look up your drug maker, go to https://www.medicare.gov/plan-compare/#/pharmaceutical-assistance-program?lang=en&year=2021
Use the link to go to the drug maker's website and complete the forms.
Additional Resources:
Your State Medicaid office, online at https://www.medicaid.gov
If you are my customer, I am assisting you with the entire process. If you are not my customer and need help, I can provide free phone consultations. If you reside in Colorado's State, I volunteer for needy seniors and provide full assistance free of cost.
Ricky Rakib
Principal at healthcareaffairs.com
(720) 744-0065 E: ricky@itrustin.com
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