Most Medicare drug plans have a coverage gap (also called the “Donut Hole”). This means there’s a temporary limit on what the drug plan will cover for drugs. Not everyone will enter the coverage gap. The coverage gap begins after you and your drug plan have spent a certain amount for covered drugs. Once you and your plan have spent $4,020 on covered drugs in 2020, you’re in the coverage gap. This amount may change each year.

Congress designed Part D so that it would provide coverage for the majority of your prescription drugs. However, a small percentage of people have medication costs that go well beyond average spending. Those people then share in a greater portion of the costs for their medications when they enter the coverage gap.

*Medicare beneficiaries who get Extra Help paying Part D costs won’t enter the coverage gap.

The coverage gap will start after the combined spending by your insurance company and yourself reaches a certain limit for the year. Medicare sets this limit each year.

For 2020 the gap begins when your drug cost reaches $4,020.

Medicare Donut Hole

 

Before you reach the gap, you normally pay co-pays for each medication. After you reach the gap, you will pay a percentage of the cost of each medication. If your medication has a high retail price, your costs for the medication will increase while you are in the gap.

In 2020, you pay 25% of the cost of your medications once you reach the Medicare Donut Hole. So if a certain medication costs $100, and you were paying a Tier 3 copay of $30 before you reached the gap, the same medication will now cost you $25 when you are in the gap.

You will also have a discount on generic medications. Some plans will continue to offer you co-pays in the gap for generic medications as an added value for that plan.

Medicare continues to tally the spending between you and your insurance company while you are in the gap. After you and your plan reach $6,350 for the year (including the $4,020), you will move out of the “Donut Hole” and go into the catastrophic coverage. This means you have reached the fourth stage of Medicare Part D, called Catastrophic Coverage. At this stage, you will only pay a small coinsurance amount or co-payment for covered drugs for the rest of the year. The insurance company picks up the rest.

Some medications fall outside of Part D altogether, and therefore do not get tallied toward the Medicare donut hole.

When you are in the gap and paying 25% of brand-name drugs, your spending counts toward exiting the gap. The manufacturer’s drug discount of 70% also counts and will help you exit the gap faster.

There are two things, though, that don’t count toward closing the gap. These are:

  • The amount that your drug plan pays toward the cost of the drug, which is 5% in the gap
  • The amount that the drug plan pays toward the pharmacy’s dispensing fee, which is 75% of the fee in 2020

Keep in mind that there are other things that don’t count toward reaching the catastrophic limit, which are your plan premium and also what you spend on any drugs that aren’t covered by your Part D plan.

When you reach the coverage gap, you’ll pay no more than 25% of the plan’s cost for covered brand-name prescription drugs. You get these savings if you buy your prescriptions at a pharmacy or order them through the mail. Some plans may offer higher savings in the coverage gap. The discount will come off of the price that your plans has set with the pharmacy for that specific drug. So if a certain medication costs $100, and you were paying a Tier 3 copay of $30 before you reached the gap, the same medication will now cost you $25 when you are in the gap.

Even though you pay no more than 25% of the price for the brand-name drug, 95% of the price—what you pay plus the 70% manufacturer discount payment—will count as out-of-pocket costs which will help you get out of the coverage gap. These items aren’t counted toward your out-of-pocket spending:

  1. What the drug plan pays toward the drug cost (5% of the price)
  2. What the drug plan pays toward the dispensing fee (75% of the fee)

Here’s an Example for 2020:

Mrs. Goodman reaches the coverage gap in her Medicare drug plan. She goes to her chosen pharmacy to fill a prescription for a covered brand-name drug.

  • Price for the drug = $60 plus a $2 dispensing fee
  • Mrs. Goodman pays 25% of the plan’s cost for the drug and dispensing fee ($62 x .25 = $15.50)
  • The amount Mrs. Goodman pays ($15.50) plus the manufacturer discount payment ($42.00) count as out-of-pocket spending.
  • $57.50 counts as out-of-pocket spending and helps Mrs. Goodman gets out of the coverage gap.
  • The remaining $4.50, which is 5% of the drug cost and 75% of the dispensing fee paid by the drug plan, doesn’t count toward Mrs. Goodman’s out-of-pocket spending.

If you have a prescription drug plan that already includes coverage in the gap, you may get a discount after your plan’s coverage has been applied to the drug cost. The discount for brand-name drugs will apply to the remaining amount that you owe.

For 2020, Medicare will pay 75% of the price for generic drugs during the coverage gap, and you’ll pay the remaining 25% of the price. The coverage for generic drugs works differently from the discount for brand-name drugs. For generic drugs, only the amount you pay will count toward getting you out of the coverage gap.

Here’s an Example for 2020:

Mr. Diaz reaches the coverage gap in his prescription drug plan. He goes to his pharmacy to fill a prescription for a covered generic drug.

  • The drug is $20 plus a $2 dispensing fee that gets added to the cost.
  • Mr. Diaz will pay 25% of the plan’s cost for the drug and dispensing fee ($22 x .25 = $5.50).

The $5.50 he pays will be counted as out-of-pocket spending to help him get out of the coverage gap. If you have a prescription drug plan that already includes coverage in the gap, you may get a discount after your plan’s coverage has been applied to the drug’s cost.

  • Your yearly deductible , coinsurance, and co-payments
  • Discount on Brand-Name Drugs in the coverage gap
  • What you pay in the coverage gap
  • The prescription drug plan premium or monthly payment
  • Dispensing Fee of the Pharmacy
  • What you pay for drugs that aren’t covered

Your Prescription Drug Plan will send you a statement, or an EOB which stand for explanation of benefits, each month. This lets you know exactly how much you have already spent on covered medications and how much dollars are left before you reach the coverage gap. The same goes after you reach the gap, the prescription drug plan you have will continue to send you notices that track your gap spending. They will calculate how much dollars are left before you reach the catastrophic coverage.

When you have reached the catastrophic coverage limit for the year, the coverage gap will stop. In 2020, the coverage gap will end when you and your plan have reached $6,350 out of pocket for that year. That limit is not just what you have spent but also includes the amount of any discounts you received in the coverage gap. Your out-of-pocket at this point will be somewhat less than that.

How do I get out of the Coverage Gap, if you may ask? Sadly, the only way to get out of the Coverage Gap is by paying for your medications through the Coverage Gap until you reach catastrophic coverage stage.

All Prescription Drug Plans will have a Coverage Gap. The best way to avoid the coverage gap is to take generic medications whenever possible. We also advise you to work with your doctor on reduce spending on your medications.

We encourage you to let your doctor know which drugs cost you the most on your Prescription Drug Plan, and ask if there are alternatives that can save you money. Some medications do not have a generic yet, but there could be similar medications will do the same thing but can cost less.

Here are some suggestions that has worked for our members:

  • Consult your doctor about alternative medications that may exist to treat the same condition that may cost less
  • Preferred Mail Service often have lower total costs than drugs through a regular pharmacy. The amount that’s applied toward your initial cost coverage limit is lowered. Currently in Nevada, we have some carriers that offer $0 for some generics when ordered through the Preferred Mail Service program
  • Preferred pharmacies usually have lower cost than standard pharmacies
  • Pharmacy’s own drug programs such as Wal-mart, have lists of generic medications that you can purchase without insurance for only a few dollars. These medications do not count towards you Coverage Gap. Ask your local pharmacist the cheapest way available on filling each medication.
  • Veterans may qualify for inexpensive medications through our local VA hospital or clinic..
  • Apply for the Low Income Subsidy. State of Nevada has savings programs that can help you with your drug costs. The Low Income Subsidy can reduce your premiums and eliminate your deductible and coverage gap if you qualify.  Please contact the Social Security Office at 1-800-772-1213 or contact the Nevada Medicaid Office.

 

At Nevada Medicare we can assist you – call us for a hassle-free help and finding a solution regarding your prescription drugs. Contact Us today.

Although Medicare Advantage Prescription Drug (MAPD) plans have Prescription Drug Plan built into them the coverage works exactly the same way that standalone Prescription Drug Plan works. However, some MAPD plans have $0 deductible on medications Tiers 1, 2 & 3. Whereas, on a standalone Prescription Drug Plan, $0 deductible only applies on Tiers 1 & 2. Depending on your current situation, considering a MAPD plan may help you lower your out of pocket cost on some medications.

 

Let us hep you determine the best way to cover your needs. We can carefully do an analysis of your current situation and guide you to the correct solution. Remember, our services are always 100% free. Contact Us today!

A Different Point of View

Since 75% of the cost of your medication is the minimum that your plan must cover during the Initial Coverage stage and the Coverage Gap some Prescription Drug Plans do better in the next level of coverage.

For instance, a drug that has a $100 retail price which happens to have a $10 co-pay during the Initial Coverage cost – When you reach the coverage gap, the cost of that drug can return back to the standard minimum of 25%.

This is still good! Consider this, the plan that you have which gives you the standard 25% coinsurance during the coverage gap, is giving you value dollar for dollar by having a low co-pay during the earlier Initial Coverage stage.

The 25% that you pay for brand name drugs in the gap is still lower for brand name drugs in the gap that plans have ever been required to give you. The coverage gap ending is actually an advantage for you.

 

At Nevada Medicare we can make it easy for you – call us for a hassle-free help in understanding your benefits and what’s available to you. Contact Us today.