Previously: In the first two posts in this series, Phase I: The Prescription Drug Deductible, and Phase 2: The Initial Coverage Period, I reviewed how Medicare Part D drug plan benefits reset each January 1, how Medicare Part D prescription drug plans may include a deductible amount to be paid before any medications are covered and then how in Phase 2, cost sharing is deermined by drug tier.
Not everyone will enter Phase 3, the Medicare Part D Coverage Gap or “Donut Hole.” It depends on the number and cost of your medications. Still, you may notice springtime refills start costing much more once you and your drug plan together have spent $3,750 on covered drugs.
|Take this example, my prescription for a box of Lantus(c)
The insurance company paid $374.31. My copay was $3.00
The total cost of $377.31 is what counts toward the $3,750 limit.
If this was the only medication I took, it would take ten refills to reach the Coverage Gap. ($377.31 x 10 = $3333.10) (If you are taking additional medications you reach that $3750 level sooner by including their total costs as well.)
Phase 3: 35 to 44% Co-Insurance?
As a recap, for that first $3,750 in total drug costs, the standard is for the Part D plan to pay 75% of the prescription cost and 25% by the plan member. Once that $3,750 cost threshold is met we enter Phase 3 with the plan member paying more, as follows:
|Brand Name Drug||Generic Drugs|
|Part D Plan||15%||56%|
So, let’s continue using the example of my $377.31 box of Lantus(c). In most Part D plans, Lantus(c) is considered a Tier 3 Brand Name medication with a co-pay for a 30 day supply normally between $50 and $60. However, when the plan member’s total cost of all drugs reach $3,750, the co-share for brand name drugs is 35% so that same box of Lantus(c) would then cost $132.06. And then the phone rings in my office.
“Dan, last month my Lantus(c) cost $50 and today the pharmacist quoted me $132. What’s going on?
No one likes that kind of surprise. Even though your brand and generic medication co-pays may be $0 to $50, your pharmacy receipt may not show the total cost like my example shown above. In that case it’s important to monitor the monthly report your Part D plan will provide online or by mail. Some plan reports even include a bar graph showing your Year to Date drug costs (what you and the Part D plan paid together) compared to the $3,750 total. That way, you will know when you’re approaching the “Coverage Gap” and not be surprised (or pleased) when asked to pay 35-44% of the drug cost.
Frequently Asked Questions:
Q: Shouldn’t I look at a different plan, perhaps with a higher premium, to avoid the Donut Hole?
A: A higher plan premium may offer an expanded drug formulary or reduce your drug deductible however the $3,750 Initial Coverage limit is applicable to all 2018 Part D plans regardless of carrier or state.
Q: Ok, so all plans have the same $3,750 Initial Coverage limit in 2018. But do they all impose the 35% (brand) and 44% (generic) cost sharing on members?
A: Some plans extend the lower Tier 1 and Tier 2 co-pays through the Coverage Gap stage. I’ve not seen a plan with lower co-insurance rates for Tiers 3, 4 and 5.
Q: Are them some steps I can take to reduce the cost of medications so I don’t enter the Coverage Gap or at least defer the date until later in the year?
A: Yes. Here are some suggestions to discuss with your agent, provider and pharmacist.
i) Ask your doctor or pharmacist if the brand name drug you’re taking may have a generic option.
ii) Ask if your plan has negotiated lower costs with preferred pharmacies. While your Part D card is accepted as most every pharmacy, you’ll experience lower retail cost (For example, United Healthcare has a preferred pharmacy relationship with Walgreens, Aetna with CVS, Humana and WalMart; ask me for the current list of your plan’s preferred pharmacies.)
iii) Many plans have lower retail cost through their preferred mail order service.
iv) Discounts. Many larger retailers and supermarket pharmacies offer deep discount prices for popular generics. Ask if the chain will fulfill their discounted prescription independent of your Medicare Part D plan, cash price, so the cost of the drug isn’t counted toward the $3,750 Initial Coverage.
v) Check out GoodRx, a drug-price comparison web site.
Q: Does this mean I have to pay 35% (brand) and 44% (generic) cost sharing on all medications until the end of the year?
A: Yes. Well at least until you reach the limit on your annual out of pocket expenses (deductible, co-pay and co-insurance) after which you enter Phase 4: Catastrophic Coverage.
Q: I’m still struggling to pay the 35% (brand) and 44% (generic) coinsurance. What financial assistance is available?
A: A handful of states offer a State Pharmaceutical Assistance Program like New York’s EPIC. These SPAP programs include conditions (perhaps a fee or its own deductible) after which your co-pay levels are capped. In New York, for example, qualified EPIC members pay no greater than $20 for medications included in their plan’s formulary. (Learn more about EPIC here.) (Listen to my interview with Beth about her amazing EPIC experience.)
Social Security Extra Help offers subsidized Prescription Drug Plan Costs to beneficiaries with limited income and limited resources. [Check out how the Extra Help program made a difference in this client’s life, and this one, too.]
Q: Did I hear this Coverage Gap / Donut Hole is going away?
A: Under the Affordable Care Act (ACA) beginning in 2011 until 2020 the coinsurance paid for prescriptions while in the coverage gap decreases at a rate of 7% annually until you pay no more than 25% of the drug cost for your generic and brand name prescription purchases, the same 25% co-insurance as in Phase 2. [Source]
In this series:
My 2017 Post on the Donut Hole