The majority of Part D Medicare plans have coverage gaps, often referred to as Medicare donut holes. What this means is that, once you have paid a particular amount of cash for prescription medication (covered under your Medicare plan), you are then required to fund all out of pocket expenses for the medication, up to a specified limit. The amount you pay whilst in the donut hole, and the annual deductible, copayments or coinsurance, all contribute towards the out of pocket expense limit. The premium for the drug plan is not included in the limit.
After the out of pocket expense limit is reached in your plan, during the donut hole period, ‘catastrophic coverage’ takes effect automatically. This means that, for the remainder of the year, you only pay a modest co-payment or coinsurance amount, after you have spent the maximum out of pocket expenses specified under your plan. Some plans provide coverage whilst you are in the donut hole, for generic medication for instance. Nonetheless, these plans tend to charge larger monthly fees. Always research the plan in advance, to find out whether your medication will be covered throughout this period.
Part D Medicare plans were first introduced in 2006. This year saw modest increases in drug utilization among Medicare members and significant reductions in out of pocket expenses. Notwithstanding, there were no demonstrable improvements in choice based health utility, hospitalizations, or emergency department use for people eligible for these plans.
In 2015, after $2960 has been spent on medication covered under your plan, you are in the donut hole. On a yearly basis, this amount might change. Also, those with Medicare who receive additional assistance paying Part D expenses will enter the donut hole.
At this point, you will pay forty-five percent of your plan’s cost for specified, brand name prescription medication. These savings will apply, if you order your medication by mail or purchase it at a chemist. The price reduction will be taken off the price your plan has agreed with the chemist for that particular medication.
While you have to pay forty-five percent of the cost of brand-name medication, ninety-five percent of the cost, the amount you pay, in addition to the manufacturer’s fifty percent price reduction, will contribute towards out of pocket expenses. This will allow you to escape the donut hole. The amount your plan pays towards the dispensing charge (fifty-five percent of the charge), and the amount your plan pays towards the medication (five percent of the cost), does not count towards your out of pocket expenses.
Medicare will pay thirty-five percent of the cost of generic medication, throughout the coverage gap, in 2015. You will pay the other sixty-five percent of the cost. The amount you have to pay for generic medication, during this period, will reduce each year until 2020, when it will have reached twenty-five percent. Generic medication works differently to brand name medication, in that only the cash you pay counts towards removing you from the coverage gap. If your Medicare plan already has coverage included during the coverage gap period, you might receive a price reduction, once the coverage for your plan is applied to the medication price. The price reduction for brand name medication will be valid for the remaining cash you owe.