The Coverage Gap

The way Medicare Part D was designed there was a planned coverage gap, which has become known as “the donut hole”. This gap has caused a great deal of confusion and higher than expected out of pocket costs for medications.

When do you reach the gap?

The gap begins when a person reaches a predetermined amount during the year based on average retail cost of drugs. In 2011, that amount is set at $2840. Since Medicare drug plans negotiate for a lower price the average retail cost is not what you actually paid out of pocket. Every drug plan can have a different negotiated amount so the same drug may cost different amounts from one plan to the next. This means that two different people with two different plans will reach the gap at different times.

A person reaches the other side of the gap when their out of pocket costs reach $4550 in a year. This excludes any amounts paid by you for premiums or any amounts paid by your insurance. This means that only actual costs out of a person’s pocket will count.

Catastrophic Coverage

Once a person reaches the other side of the gap they are into what is called catastrophic coverage for the rest of that year. With this catastrophic coverage a person will pay up to 5% of the drug cost and the remainder will be covered by the drug plan.

Closing the Gap

A great deal of effort is being made to close this gap and in 2011 a special program was put in place that helps cover medication costs once the gap is entered. Once a person reaches the gap they received discounts to help cover costs. For covered brand name drugs a 50% discount is offered and a 7% discount for covered generic drugs. It is expected that the gap will be closed by 2020.

Programs to help ease the burden caused by the gap include a one-time $250 rebate check mailed to eligible beneficiaries beginning in June 2011. Those in the donut hole will also be eligible to receive a 50% discount on all brand name drugs and a 7% discount on generics.

By 2013 people in the gap will begin to pay less and less for brand name drugs and by 2020 their hole will be closed completely. Beneficiaries will only pay 25% of drug costs until they reach the annual spending limit.

Click here for a gap calculator

The Affordable Care Act

In March of 2010 the Affordability Care Act was signed into law. It contains a number of provisions that create changes in American healthcare over the next 5 years. Provisions include:

New consumer protections

  • Placing easy to understand online tools that will allow people to compare medical coverage options
  • Prohibiting coverage denial for children with pre-existing conditions
  • Preventing health plans from canceling coverage because of illness
  • Eliminating lifetime coverage limits and regulating annual limits for essential services
  • Providing better access for people to appeal decisions and creates programs to help consumers navigate the system

Better quality and lower costs

  • Providing help for small employers to be able to offer insurance to employees
  • Coverage of preventive care at no cost
  • Efforts to cut down Medicare fraud
  • Creating programs to improve public health
  • Steps to close the Medicaid Part D donut hole

Increased access to affordable care

  • Provide a new insurance program for people who have been without coverage for 6 months due to a pre-existing condition
  • Allowing young adults to remain covered under their parents health insurance until age 26 in some circumstances
  • Creation of a program to expand coverage for early retirees
  • Expansion of the number of primary care doctors, nurses and physician assistants to make healthcare more available and increasing payments to providers in rural areas
  • Holding insurance companies responsible for unreasonable rate hikes
  • Allowing states to cover more people through Medicaid by providing matching funds
  • Providing increased funding to support and build more programs at community health centers

Extra Help for Low Income

People who meet certain low-income criteria may be eligible to receive additional financial assistance with premium and drug costs. The Extra Help Program is only available to those who are enrolled in a Part D plan. To get help enrolling or for additional financial help call 1-800-MEDICARE (TTY 1-877-486-2048) or go to the Medicare website www.medicare.gov.

Medicare Savings Programs 

Medicare Savings Programs (MSPs) are state programs for people with limited resources or low income to help to cover Medicare costs. This application can be done at the same time as the Extra Help application. The programs vary from state to state and can help cover premium costs and in some states may help with deductibles and co-insurance costs. This link can take you to the Medicare website and information for each state: http://www.medicare.gov/contacts/staticpages/msps.aspx

References

Q1 Medicare.com: http://www.q1medicare.com/PartD-MoreOnTheDonutHolesOrCoverageGap.php

Medicare website: https://secure.ssa.gov/apps6z/i1020/main.html

Medicare Savings Programs: http://www.medicare.gov/contacts/staticpages/msps.aspx