Coverage Gap: What is it and how do I avoid it?
If you have Medicare, you may or may not have heard of something called the Donut Hole, known more formally as the coverage gap. But what exactly is it and why do I need to avoid it at all costs? (pun intended)
In short, the Donut Hole is a period of time when you will pay a lot more for your medications out of your own pocket. But you’re probably asking yourself, “how did I even get in the Donut Hole in the first place?”
Most Medicare plans will pay a maximum amount of $3,700 towards your covered prescription medications. Once they have paid this amount, you will now be considered in the Donut Hole. This usually comes as a shock because most prescription copays up to this point are under $10, but at your next pick-up a copay could be $50 or more, even for generics.
So how do you get out of the Donut Hole? As your copays for prescriptions will now be much higher than normal, when your out of pocket expenses reach $4,950, you’ll then be considered outside of the coverage gap, a.k.a the Donut Hole. In other words, to get out of the Donut Hole, your copays would have to total more than $4,950 for the year, that’s including all copayment amounts from before you were in the Donut Hole. As shocking as these numbers are, there is light at the end of the tunnel. At this point when you’ve reached this amount, you’ll only pay the greater of the following: a) 5% of the cost of your medication, or b) $3.30 for generic drugs and $8.25 for brand name drugs.
So the big question is, “Is there a way to avoid the Donut Hole?” The simple answer is yes. By making sure the cost of your medications is as low as possible, you avoid your insurance paying that $3,700 before the year is over, or at least as late into the year as possible.
Confusing, right? Don’t worry, at the bottom of this post is an example from Medicare’s website to help illustrate. If you have more questions about the Donut Hole and how to avoid it, please email me at richard@medvize.com. You can also get more info at Medicare’s website at medicare.gov.
Hope this post was helpful! Thanks for reading.
Take care and have a great day!
Example 1
“Mrs. Anderson reaches the coverage gap in her Medicare drug plan. She goes to her pharmacy to fill a prescription for a covered brand-name drug. The price for the drug is $60, and there’s a $2 dispensing fee that gets added to the cost. Mrs. Anderson pays 40% of the plan’s cost for the drug and dispensing fee ($62 x .40 = $24.80).
The amount Mrs. Anderson pays ($24.80) plus the manufacturer discount payment ($30.00) count as out-of-pocket spending. So, $54.80 counts as out-of-pocket spending and helps Mrs. Anderson get out of the coverage gap. The remaining $7.20, which is 10% of the drug cost and 60% of the dispensing fee paid by the drug plan, doesn’t count toward Mrs. Anderson’s out-of-pocket spending.”
Example 2
Mr. Evans reaches the coverage gap in his Medicare drug plan. He goes to his pharmacy to fill a prescription for a covered generic drug. The price for the drug is $20, and there’s a $2 dispensing fee that gets added to the cost. Mr. Evans will pay 51% of the plan’s cost for the drug and dispensing fee ($22 x .51 = $11.22). The $11.22 he pays will be counted as out-of-pocket spending to help him get out of the coverage gap.
