With the new year starting there are changes to prescription coverage limits and the question of “What is the donut hole?” Instead of just explaining the Donut hole, I would like to explain prescription coverage for 2022. Each year the coverage limits of prescription drug plans for Medicare change, for good or bad there is typically an update of some sort.
Last year the big update to Prescription Drug Coverage was the introduction of the Senior Saving Model or as I like to refer to it as “Insulin Savings Program.” This program helped reduce the cost of certain insulins to $35 a month for many seniors, if you would like to learn more about this program look at our article on it by clicking here "The 2021 Part D Senior Savings Model"
For Prescription Drug coverage there are typically 4 stages of coverage. The Deductible phase, the Initial Coverage Phase, the Coverage Gap Phase (Donut Hole), and Catastrophic Coverage phase.
The Deductible Phase
The Deductible Phase is the amount you must pay before your Drug Plan begins paying anything. The deductible on Prescription Drug Plans varies from Drug Plan to Drug Plan, however the deductible on any plan cannot be more than $480. Prescription Drug Plans can make the deductible apply for every Prescription or set the deductible to apply to certain Tiers. Many Drug Plans have begun making the deductible apply to Tier 3 (brand name and above) and letting Tier 1 and 2 (generic drugs) go straight to the Initial Coverage Phase.
The Initial Coverage Phase
The Initial Coverage Phase is the cost share between you and your carrier (Drug Plan Provider), your cost share being a copay or coinsurance. During this phase you will pay a portion of the prescription cost and the carrier will pay for the rest. The Initial Coverage Phase is active until the combined costs between you and the carrier hit $4,430.
The Coverage Gap (Donut Hole) Phase
After the drug expenses between you and the carrier have hit $4,430 you go into the Coverage Gap otherwise known as the “Donut Hole.” During this phase of drug coverage you will pay for 25% of your prescription costs until your annual drug expenses hit $7,050. This means that you will pay for 25% of the drug costs until you pay $2,620 out-of-pocket while in this phase. Your drug plan and the manufacturer will pay for the other 75% of the prescription costs. For brand name drugs, the manufacturer will pay 70% of the cost and drug plan pays 5%, while you pick up the remaining 25%. The 70% from the manufacturer and your 25% are what contribute to the out-of-pocket cost of $2,620 from this phase.
The Catastrophic Coverage Phase
The final phase of a Drug Plan is once the full $7,050 of prescription drug costs has been met for the year. This takes you out of the Donut Hole, paying 25% of drug costs taking you down to paying small amounts for the prescriptions you are taking. During this final phase you will either pay 5% of the drug cost or $3.95 for generic drugs and $9.85 for brand name drugs, whichever is greater.
There is quite a bit that goes into Prescription Drug Coverage and if you have not had anyone sit down to explain this coverage to you before it can definitely seem overwhelming. The great thing is that not everyone will hit the Donut Hole, many that are taking few prescriptions will just have to worry about the copays all year. If you are unclear about whether you are going to hit the Donut Hole or not, you can come into one of our offices and we can create a full breakdown of your prescriptions and let you know what your monthly prescription cost will be.
If you have not had a chance to review your prescription drug plan, it can be worthwhile to come in for us to review your prescriptions and see if any new plans may provide more coverage towards the prescriptions, you take. If you are taking any high-tier prescriptions that are costly to you or making you hit the coverage gap, we can also help you take advantage of assistance programs that may be available. There are typically a couple of assistance programs available for most prescriptions. If you are not receiving any help currently and unsure if there are any programs let us take a look for you and potentially find you some great savings.
If you would like to learn more about Prescription Coverage or get a review with your Local Medicare Broker, feel free to reach out!
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