Since its beginning in 2006, the Medicare Part D prescription drug plan has played a crucial role in providing Rx drug coverage to millions of Medicare beneficiaries. This plan is designed to help Medicare beneficiaries pay for self-administered prescription drugs, that is medicines you keep at home and take on your own.
Medicare beneficiaries can participate in Part D through either a stand-alone prescription drug plan or a Medicare Advantage plan that includes prescription drug benefits. Through Part D, Medicare finances more than one-third of retail prescription drug spending in the United States. Part D has been a great benefit to seniors, but it has also had “gaps” in coverage.
The most famous of these was the “donut hole” in Rx drug coverage that existed in the original law. The donut hole was a gap in coverage that began when the deductible amount was paid and the “initial coverage period” reached a certain level. The senior then entered the “donut hole” in which there was no coverage at all. This lasted until drug spending reached a “catastrophic” level, at which point Part D resumed coverage.
The donut hole was a disaster for some seniors. It meant that suddenly, they were responsible for 100% of the cost of prescription medicines. While in the coverage gap, beneficiaries might delay filling prescriptions or skip doses due to the high costs. Some beneficiaries had to choose between essential drugs and other necessities.
Fortunately, the Affordable Care Act (the ACA or “Obamacare”) started to correct this situation. The size of the donut hole contracted yearly until it disappeared in 2020. There remains a coverage gap period, during which seniors pay 25% of the negotiated price of covered drugs. This is a great improvement over the 100% previously charged, but it can still amount to a financial burden to many seniors. Studies show that on average, seniors pay $3500 out of pocket before they qualify for catastrophic coverage. In 2025, the maximum out-of-pocket costs will be further reduced. Next year, individuals will pay no more than $2,000 out-of-pocket for the entire year.
This subject is complicated by the fact that there are variations in the Part D and Advantage Plans offered by individual private insurance companies. However, all Medicare Rx plans have 4 “coverage periods.” They are-
Deductible period, during which you will pay the full negotiated price for your covered prescription drugs. Once you have met the deductible, the plan will begin to cover the cost of your drugs. While deductibles can vary from plan to plan, no plan’s deductible can be higher than $545 in 2024, and some plans have no deductible.
Initial coverage period, during which your plan will help pay for your covered prescription drugs. Your plan will pay some of the cost, and you will pay a copayment or coinsurance. How long you stay in the initial coverage period depends on your drug costs and your plan’s benefit structure. For most plans in 2024, the initial coverage period ends after you and your plan have accumulated $5,030 in total drug costs.
Coverage gap period, during which you will be responsible for 25% of the cost of your drugs. In the past, you were responsible for a higher percentage of the cost of your drugs (up to 100%.) Although the donut hole has closed, you may still see a difference in cost between the initial coverage period and the donut hole. For example, if a drug’s total cost is $100 and you pay your plan’s $20 copay during the initial coverage period, you will be responsible for paying $25 (25% of $100) during the coverage gap.
Catastrophic coverage, during which you pay nothing for the remainder of the year. In all Part D plans, you enter catastrophic coverage after you and your plan reach $8,000 in costs for covered drugs. During this period, you owe no cost-sharing for the cost of your covered drugs for the remainder of the year.
OurSeniors.Net strives to be your go to source for senior news and useful information. Closing the donut hole and shrinking the out-of-pocket costs under Part D is certainly good news. Thanks for reading our blog and keeping up with OurSeniors Radio, which you can watch and listen to on www.ourseniors.net and iTunes, Spotify, The Podcast App, Apple Podcasts, Pocket Casts, Overcast, and many other podcast services. It was created with seniors in mind, so don’t miss it. You can also subscribe to our channel on YouTube at OurSeniors.Net Radio.
