Medicare donut hole: What to know

The Medicare donut hole is a colloquial term that defines a void in Medicare Part D coverage for prescription drugs. For 2020, Medicare is making any improvements that are helping to fill the donut hole more than ever.

Medicare Part D is the Medicare portion which helps an individual pay for prescription medicines. A person enrolled in Medicare does not have to choose Medicare Part D. However, they do need to have some other prescription drug coverage, usually via private insurance or health insurance.

We explain the donut hole in this article, and how it applies to the cost of Medicare prescription drug.

What is the Medicare donut hole?

Medicare donut hole

Medicare Part D plans will vary depending on the insurance selected by one person.- coverage lists the medications it covers, as well as other medicines for which a portion of costs may be covered.

The word donut hole refers to the manner in which a individual must pay for coverage.

A person pays for their prescription drugs a set amount, and if they reach the deductible, their program takes over the funding.

However, the individual has entered the donut hole when the plan has payed up to a defined limit.

When they reach this point, a person must start paying back for their medications before they reach another specified amount. After this, their program once again takes over payment.

The problem with the donut hole is that when they reach the donut hole, many people in the U.S. stop taking their drugs because they can’t afford to pay the high drug prices. Often they have to pay thousands of dollars for prescription drugs until they close the gap in coverage.

They achieve “catastrophic coverage,” nonetheless, once a individual crosses the donut hole. If they reach this stage, they only have to pay about 5 percent of the prescription drug costs. Nonetheless, getting to the point of catastrophic coverage is alarming or unlikely for many consumers in the U.S.

Legislators have passed legislation that has, like the Affordable Care Act, gradually helped to close the donut hole. Consumers also experience changes in their coverage, however, as they spend on prescription drugs. Reporting stops once a person reaches their drug spending financial cap and re-starts during a catastrophic coverage.

The improvements Medicare is making are aimed at reducing the costs people bear while they’re in the donut hole.

What is the donut hole gap in 2020?

The government took numerous steps in 2011, which started to close the hole in the donut. Those encompassed:

  • 2011: The Affordable Care Act required pharmaceutical manufacturers to introduce discounts of up to 50% for brand name drugs and up to 14% for generic drugs, making it easier for people to buy medications once in the donut hole.
  • 2012‑2018: The discounts continued to increase.
  • 2018: The Bipartisan Budget Act sped up changes to prescription drug discounts when a person was in the donut hole. Examples included manufacturer discounts and decreasing a person’s costs on brand name drugs once they enter the donut gap.

Such reforms were aimed at making medications more accessible once a person hit the donut hole, which would allow people to continue taking their drugs and reduce the risk of a treatment break.

As of 2020, prescription drug coverage takes the following shape:

  • A person pays their co-payment for their prescription drugs, depending upon their drug plan. Their plan funds the remaining portion.
  • When a person and their insurance company have jointly paid out a total of $4,020, the individual reaches the next stage — the donut hole.
  • In the donut hole, a person pays for 25% of their medication costs out-of-pocket and receives discounts from drug manufacturers to cover the remaining costs.
  • The insurance company will add up what a person has paid out-of-pocket for medications in the donut hole. Once this total reaches $6,350, a person has crossed the donut hole.
  • A person is now in the catastrophic coverage stage of their medication coverage. Their insurance company now requires that they pay either 5% of a drug’s cost or a minimum copay, whichever is higher.

Ideally, such changes would allow a person to have long-term access to the medications prescribed by their doctor.

How does it work?

Here is an example of how a Medicare patient passes through the donut hole and achieves catastrophic coverage by 2020.

  1. An individual and their insurance company have spent $4,020 on medications since the start of their plan. That person is now in the donut hole.
  2. The person pays 25% of their medication costs. For example, if they have a medicine that costs $100, they will pay $25. The pharmaceutical company then discounts the medication by $70, and the insurance company pays the remaining $5.
  3. The person continues paying 25% out of their own money until they have spent $6,350. When this occurs, they are out of the donut hole.
  4. A person is now in the catastrophic coverage portion of their coverage. They will pay either a minimum copay or 5% of the drug’s cost.

An estimated 4.9 million Medicare Part D enrollees exceeded the catastrophic coverage portion of Medicare Part D in 2017, according to the most recent Kaiser Family Foundation statistics.

How to get out of the donut hole

Individual can get out of the Medicare donut hole by meeting their requirement for out- of-pocket expenses of $6,350 by 2020.

There are, however, ways to receive assistance to finance prescription drugs, especially if a person meets certain low-income requirements. Including:

  • Extra Help: Extra Help is a Medicare program that helps people pay for medications and other aspects of medical care. A person can qualify for Extra Help if their income is $18,735 or less when single or $25,365 or less as a couple. They must also have less than $14,390 as a single person or $28,720 as a married couple in resources. Resources include savings, stocks, or bonds.
  • Medicaid: Medicaid is a federal program that helps low income individuals pay for healthcare. People who qualify for Medicaid are automatically enrolled in the program.
  • State Health Insurance Assistance Program (SHIP): These state-specific programs can provide additional assistance for people in funding healthcare costs, including medications.

Most pharmacy firms now provide drug aid services that can cut costs. Sometimes, a doctor or pharmacist might make suggestions to contact the drug company.

Summary

According to an article in < em > The New England Journal of Medicine, some 42.5 million people in the US obtain prescription drug coverage through Medicare Part D.

Closing the hole in the donut will help a person reduce the cost of prescription drugs. However, once they hit the donut hole, they will still be liable for 25 per cent of costs.

If an person has trouble paying for pharmaceutical drugs, state, federal and private organizations can help.

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