The donut hole is something thousands of people wonder about each year. Medicare members know there is a donut hole but some have never experienced it. People that are new to Medicare have heard about it and those that are using Medicare part D for the first time are afraid of it. There have been a lot of stories about the donut hole for different reasons. The biggest reason most people fear the Medicare part D donut hole is because they don’t understand it.
Every Medicare part D plan has a structure. It is set up to operate in a specific order and the donut hole is just one of those parts. It’s the most talked about part of the plan because the out of pocket costs for Medicare members can increase during that time. Everyone will have a different experience with it but it’s something that people will eventually go through.
The Donut Hole
No matter what insurance carrier is offering the Medicare part D plan, they are all set up to follow a specific order. These plans will have:
It’s normal for a deductible to be listed in Medicare part D information but it’s not something that all insurance providers have on their plans. If there is no deductible for the plan, the prescription drug plan will start with the Initial Coverage Period.
Each year there are changes to the limits of each level of these plans. For 2015 Medicare members may be asked to pay $320 for their deductible. During the Initial Coverage Period, the insurance provider has agreed to pay $2960 in medication costs. During this time members will pay a copay or coinsurance. This is the part of a Medicare part D plan that most people are used to. After the $2960 has been spent the donut hole begins.
When the donut hole starts, people notice because the copays and coinsurance costs they are asked to pay at the pharmacies go up dramatically. Where some people are used to paying $7 for a generic medication, they may be asked to pay $25. This happens because the insurance provider is no longer sharing the cost of the negotiated price of the medication. The member is now responsible for the entire cost of the negotiated price of the medication. This is what is so alarming for most people because the costs can add up very quickly during this time.
The Numbers of the Donut Hole
When people get to the donut hole of their Medicare part D plan they assume they no longer have insurance. That’s not true. People that are in the donut hole do still have insurance. During this part of the Medicare part d plan, members have to pay the full negotiated price of the medications. That means the prices that are being paid are the prices the insurance company agreed to allow their members to be charged. The prices that are paid are NOT retail price. So the insurance plan is still working for the members, just not the same way they have gotten used to.
When people begin using their Medicare part D plans, the costs are tracked. The costs that are added are the negotiated prices. When people get into the donut hole, they will have to spend a total of $3400-$3720 to get out of it. If there is a deductible in the plan, members will have to pay $3400. For the plans with no deductible the additional costs will be $3720. For some, the donut hole is something they will not pay out of because the cost of their medications won’t meet the payment threshold. There are others that will quickly pay their way through the donut hole because their medications are expensive.
There is life after the donut hole. For those that pay out of the hole, they will go into catastrophic coverage. This lasts until the end of the year. For those that don’t pay out of the donut hole, it ends at the end of the calendar year, Dec. 31, 2015.