Medicare Donut Hole

The Medicare Donut Hole is the gap between the initially covered limit for the prescription drugs and the minimum threshold for the catastrophic coverage. This means is that once you exceed the prescription medication coverage limit you must finance the entire cost of the medicines until your expenses reach the catastrophic coverage level. The limits are outlined in the Medicare Part D prescription drug program.

The Medicare Donut Hole can be a shocking experience for many people who suddenly find themselves having to pay the full price of the medications when they assumed they were covered. Furthermore, the price point is not calculated on the amount you’ve paid personally on the medication but on the total retail cost of the covered prescriptions – also known as the ‘Total Drug Spend’.

According to the CMS Model, the coverage gap occurs at around $2,830. However, it varies according the medical plan and in some cases can start as early as $1,800. Additionally, the $2,830 does not include non-plan medication or prescription drugs purchased outside of the United States.

Currently, the TrOOP (true out of pocket expenses) for an individual stands at around $4,550 before the catastrophic threshold is attained. This does not include your monthly premiums or any portion of your prescription medication that may be covered by your provider. The annual caps are calculated on a yearly basis, which means that the TrOOP level changes from year to year.

The coverage gap occurs to people who have chosen to get prescription drug coverage under the Medicare Part D. If you’re on Plan D and your annual prescription medication costs are low, it is possible not to run out of coverage. Other ways of avoiding the Medicare Donut Hole is by enrolling in supplemental health plans that reduce or completely eliminated the coverage gap, although this necessitates a higher monthly premium. People eligible for Medicaid and certain other coverage may also not face the coverage gap.

Once the catastrophic threshold level is attained the Medicare Part D beneficiary will pay just minimal charges per month of about 5% of the cost for both generic and name brand medications.

Does this mean one has to keep track of his retail medication costs? No, because the Part D plan provider will be tracking and gathering your costs in view of the Donut Hole. In your monthly statement there should be included a note as your approach the $2,830 point.

To stay on top of your Plan D costs, keep track of your monthly medication expenses and all paperwork related to your medical coverage. Retain all receipts for drug purchases so that you know how much of the medication cost is paid by your insurance cover.

Actions are now in place to deal with the Medicare Donut Hole. In 2010, the Obama Administration announced, through the Patient Protection and Affordable Care Act of 2010, a rebate check program of $250 per month for people who fall into the coverage gap and upon reaching three months in the ‘hole’. The act aims to completely eliminate the coverage gap by the year 2020.