In the previous blog post, the Deductible and Initial Coverage periods were explained. Now that you have a better understanding of these coverage periods, it’s time to explain the last two – the coverage gap or donut hole period, and the catastrophic stage. Read on to learn about the donut hole and catastrophic stages of Medicare Part D.
How Much Do I Pay in the Medicare Part D Coverage Gap?
While you’re in the Coverage Gap (Donut Hole) stage, you are responsible for paying 25% of your drugs in 2021. This might sound a bit painful, but the coverage gap (donut hole) had been closing since the passing of the Affordable Care Act 10 years ago. Medicare recipients used to have to pay for 100% of their prescription drug costs while still in the gap. Once your yearly out-of-pocket costs hit the amount set by CMS, which is $6,550 in 2021, that you have paid in out-of-pocket costs for covered drugs (this is the amount that you have paid, not the total amount of drug costs that you and your individual have paid), you move into the “catastrophic coverage” stage.
The Catastrophic Stage
In this stage of Medicare Part D, after you have paid $6,550 in out-of-pocket costs for covered drugs in 2021 (this is the amount that you have already paid, not the total drug prices that you and your plan have paid before), you reach the catastrophic stage. During this stage, you pay significantly lower copays for your drugs. While in this stage, you pay minimal copays for each prescription. If you have reached this stage, this coverage stage will extend through the end of the calendar year.
Keep in mind that the different stages restart each New Year in January.
To sum this up the different coverage periods, and make it easy to understand, here is what happens during those periods. If the costs of your medications surpass the cost threshold set as the threshold for the current year, established by The Centers for Medicare and Medicaid Services (CMS) each year, for the different stages of the coverage, you fall into the next stage. The first stage is easy, and you essentially pay all the costs of your medications if your plan has a deductible, until you reach that deductible threshold.
During the Initial Coverage period threshold, which includes what you pay out of pocket and what the insurance company pays as their cost during the calendar year, you have to pay your share of the costs, which are typically in the form of a copay or co-insurance. This is set based on the formulary, and tier system, established by the insurance carrier. Once you reach a set dollar amount set each year, you fall into the coverage gap (donut hole). This is only once the overall costs for your medications reach over that threshold of the Initial Coverage Period.
This gap, or “donut hole,” as it is known, occurs once your prescription drug coverage reaches a certain overall dollar amount, which is set by CMS each year. Once your prescription drug coverage cost reaches this threshold, you are responsible for a more significant portion of your medications’ prices than you might have been paying prior, during the Initial Coverage Period. Rather than paying a copay or co-insurance per prescription drug, you will pay a percentage of the drugs’ total cost. This is designed to encourage Medicare recipients to seek out cheaper alternatives to their drug plans, and to keep the price of the Medicare Part D programs down.
Those whose prices hit this level have reached higher-than-average costs to Medicare, so they’re expected to share more in total costs. Lastly, once you have reached the out-of-pocket threshold of the Coverage Gap (Donut Hole phase, you reach the Catastrophic Phase, where you will pay a meager cost share for your prescriptions, until the following year.
How Do You Cover the Medicare Part D Coverage Gap?
Medicare foots around 90% of the cost of Medicare Part D. So Medicare must pay expensive premiums to insurance companies to offset the price insurance company’s pays to give affordable prescription drugs. The gap is supposed to push costs down, and encourage recipients to pick generic wherever possible so that the Medicare program doesn’t balloon in costs to the taxpayer.
Specific insurance isn’t available to cover the donut hole, but seniors have never paid less for their medications while in the coverage gap. The one exception to the Medicare Part D donut hole is those who qualify for Extra Help for Medicare Part D, a program run by the Social Security Administration. The requirements of eligibility are based on the income and resources of the Medicare beneficiary. Social Security offers this subsidy to individuals who qualify for the program and must be applied for and requested continuation annually. This is a low-income subsidy that allows for Medicare Part D recipients to benefit by lowering their Medicare Part D monthly premiums and their cost-sharing on the medication side.
Social Security Low Income Subsidy, also referred to as Extra Help, will help cover the costs of the medications covered under Medicare Part D, even while in the gap.
We at Healthcare American are specialists in understanding how to set up an individual’s Medicare Part D coverage. This will include the best price-sharing plan according to your unique medication listing and your income and resource capability. We can help you understand what type of policy will fit your individual requirements, and we can help you to apply for this Coverage and any subsidy you might qualify to receive. Give us a call to understand how we can help.
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