Medicare “Donut Hole” Changes Being Made and What It Means For You
Mmmm…donut holes. You may be thinking of relaxing on a Saturday morning, sipping coffee and eating these tasty, sugary, fried treats. Unfortunately, the type of donut hole we’re talking about is not so tasty.
What is the “Donut Hole?”
The Medicare coverage gap, better known as the “donut hole,” is a mystery to many, however there are thousands of people that it effects every year1. Simply put, it is a gap in coverage of medications after a certain amount has been contributed2. In other words, after you and your plan have spent a total of $3,750 on medications for the year (not including your deductible), the plan stops covering those medications and you are required to pay the entire cost of the medication out of pocket2. Once you enter the donut hole, and pay a total of $5,000 for the year (including your deductible) you enter what is called “critical coverage,” and you only pay 5% of the total cost for each medication3.
Changes to the Donut Hole
The Affordable Care Act set in motion a plan to get rid of the donut hole completely1,2,4,7. The act set in place a “discount” that each plan member would get every year when they reached the donut hole. This discount would be paid by the manufacturers of the medications, and would increase each year until 2020, when the donut hole would be gone completely2.
- In 2018, once a member enters the donut hole, they pay 35% of the total cost of the brand name drug, and the manufacturer pays a 50% discount2. This discount would be applied to the total cost spent by you, the plan member.
- Example: you need a $100 medication, you pay $35, the manufacturer discounts you $50, so it looks as if you payed $85.
- That $85 goes towards the $5,000 required spending to get out of the donut hole.
- Once that $5,000 is spent, you reach critical coverage and only pay 5% of the brand name drug cost.
On Friday February 9th, the president signed a budget deal to “get rid” of the donut hole sooner4,5,6,7.
- In 2019, once you reach the donut hole you will only pay 25% of a brand name drug cost, the insurance company will cover 5% of the cost and the manufacturer will cover the other 70%4,5,6,7.
- You will receive credit for the 70% discount from the manufacturer, plus the 25% that you contributed for a total of 95% of the drug cost4,5,6,7.
- This amount will go towards the $5000 threshold, after which you will be in “critical coverage” and pay only 5% of the total drug cost.
- Example: If you need a $100 medication, you pay $25, the manufacturer discounts you $70, so it looks as if you payed $95.
- The $95 goes towards the $5,000 to reach critical coverage where you will only pay 5% of the drug cost for the rest of the year.
So, the donut hole will still technically exist, but now instead of paying the full 100% of the cost of your medications, you will only pay 25%, and be credited with 95%.
What does this mean for you?
Healthcare in general can be complicated, especially as you factor insurance and coverage into the mix. There are a lot of numbers and percentages, so if you got lost in the numbers throughout this description, basically this means that if you typically reach the donut hole each year and are expected to pay for medications out of pocket, you will be saving a lot of money. Some people may not have enough medications or a high enough drug cost to even reach the donut hole, which is great, however as people get older they tend to have more health complications and need more medications. This can cost a lot of money. With these new laws and budget deals in place, if you have been reaching the donut hole previously, your total cost savings can increase quite a bit compared to previous years1.
How do you know if you will reach the donut hole?
Once again, the numbers above can be tricky to work through. Luckily there are easier ways to look at cost, spending and discounts.
- It is estimated that if you pay more than $318 a month, you will enter the donut hole before the end of the year.
- If you pay more than $743 a month, you will exit the donut hole before the end of the year and enter catastrophic coverage (based on a deductible of $415)4.
These numbers are just estimates based off common coverage and will differ depending on the deductible you have and the coverage you pay for. If you want to find out more about how much you spend compared to how much is covered, there are Medicare Part D donut hole calculators that break it down by each monthly payment4. Lastly, pharmacists are always a great source of knowledge as they deal with these plans on a daily basis, so never forget to ask a pharmacist or even your plan directly if you have any questions regarding the changes.
- “2017-01-13.” CMS.gov Centers for Medicare & Medicaid Services, 23 May 2018, www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2017-Press-releases-items/2017-01-13.html.
- “Costs in the Coverage Gap.” Medicare.gov – the Official U.S. Government Site for Medicare, www.medicare.gov/part-d/costs/coverage-gap/part-d-coverage-gap.html.
- Bunis, Dena. “Medicare Part D ‘Donut Hole’ Will Close in 2019.” AARP, 9 Feb. 2018, aarp.org/health/medicare-insurance/info-2018/part-d-donut-hole-closes-fd.html.
- A Preview of 2019: CMS Releases the Proposed 2019 Medicare Part D Standard Drug Plan Coverage Parameters.” Q1Medicare.Com, 2 Feb. 2018, 1524, https://q1medicare.com/q1group/MedicareAdvantagePartD/Blog.php?blog=A-preview-of-2019–CMS-releases-the-proposed-2019-Medicare-Part-D-standard-drug-plan-coverage-parameters&blog_id=397&frompage=18.
- Cubanski, Juliette. “Summary of Recent and Proposed Changes to Medicare Prescription Drug Coverage and Reimbursement.” The Henry J. Kaiser Family Foundation, The Henry J. Kaiser Family Foundation, 15 Feb. 2018, kff.org/medicare/issue-brief/summary-of-recent-and-proposed-changes-to-medicare-prescription-drug-coverage-and-reimbursement/?utm_campaign=KFF-2018-Medicare&utm_content=67264845&utm_medium=social&utm_source=twitter.
- Larson, John. “H.R.1892 – 115th Congress (2017-2018): Bipartisan Budget Act of 2018.” Congress.gov, 9 Feb. 2018, congress.gov/bill/115th-congress/house-bill/1892?q=%7B%22search%22%3A%5B%22H.R.1892%22%5D%7D&r=1.
- “Prescription Drug Benefits.” Social Security History, Social Security Administration, 22 Feb. 2018, www.ssa.gov/OP_Home/ssact/title18/1860D-02.htm.
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