This story was originally posted on June 6, 2017 and last updated on February 20, 2018.
A recent study by the University of Illinois at Urbana-Champaign shares that mortality rates have decreased 2.2% annually since Medicare Part D prescription drug coverage began in 2006. This is good news for Medicare beneficiaries because it shows that the Medicare Part D program is working and is worth signing up for as supplemental insurance to Original Medicare. Still, it doesn’t mean that prescription drug prices will stop rising or that the coverage gap, or “donut hole,” is any easier to navigate when it comes to out-of-pocket costs.
Understanding Medicare is not always easy, especially when it comes to specific aspects of your health insurance benefits such as enrollment and costs. Take, for instance, the Medicare Part D prescription drug coverage gap. Also known as the Medicare “donut hole.”
What is the Medicare Part D donut hole?
Basically, the donut hole is a coverage gap, or temporary limit on what the drug plan will cover, in Medicare Part D for the costs of prescribed medicine. This coverage gap is the amount of time between when your payments for prescription drug costs remain in the initial coverage period and when your payments reach the government-set “catastrophic” limit.
The coverage gap, also called the Medicare donut hole, means your plan does not cover your prescription drug costs. However, there are federally-funded discounts available. In 2018, name brand drugs will be discounted at 65% and generic drugs will be discounted 56%, meaning you’ll pay 35% for name brand drugs and 44% for generic drugs. The good news is that the coverage gap will be completely phased out by 2019, and you will pay no more than 25% of drug costs after you’ve met your deductible.
Changes from the Bipartisan Budget Act of 2018
On February 9, 2018 the President signed into law the Bipartisan Budget Act of 2018 to end the government shutdown. With the passing of the BBA of 2018:
- The coverage gap will now close one year earlier, in 2019 instead of 2020.
- Starting in 2019, biosimilars will be treated the same as other brand-name drugs in the Part D coverage gap discount program.
- There will be an increase in Part D premiums for those with incomes of $500,000 (individual) or $750,000 (couple) beginning in 2019.
When does the coverage gap happen?
The coverage gap begins once you leave the initial coverage stage and ends when you and your plan spend a total of $3,750 out of pocket in 2018. If you reach the gap in 2018, you will pay no more than 35% on covered brand-name prescription drugs and 44% on covered generic drugs. If you are on Extra Help, you won’t enter the coverage gap.
Once you have reached the out-of-pocket limit of $5,000, you qualify for catastrophic coverage. You pay only a small copayment or coinsurance for covered drugs for the remainder of the year in this stage. Only a small percentage of beneficiaries reach the catastrophic coverage stage each year.
What counts towards the coverage gap
Items that count toward the coverage gap are: your annual deductible, coinsurance, and copayments; the discount you get on brand-name drugs in the coverage gap; and what you pay in the coverage gap.
Things that do not count toward the coverage gap are: your drug plan’s premium; the pharmacy dispensing fee; and anything you pay for drugs that aren’t covered.