En español | Q. I hear the new health care law has given us a better deal in the Part D doughnut hole. How does this work?
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In the past, the gap in coverage known as the doughnut hole was always the biggest drawback for people enrolled in the Medicare Part D prescription drug program. But now, under a provision of the 2010 Affordable Care Act (“ObamaCare”), the gap is steadily shrinking and saving Part D enrollees a lot of out-of-pocket expenses.
You fall into the gap if the total cost of your drugs since the beginning of the year reaches a certain level: $2,850 in 2014. (The "total cost" in this initial coverage period includes the amount you've spent yourself — your deductible, if your Part D plan has one, and copayments — and the amount your plan has contributed.)
At that point, in the years before 2011, you would have had to pay 100 percent of the cost of your drugs in the gap, unless you had other coverage. And only when you had spent a large amount out of pocket since the beginning of the year ($4,550 in 2014) could you get out of the gap and qualify for low-cost catastrophic coverage until the end of the year.
But between 2011, when this provision of the law kicked in, and 2020, your share of the costs in the doughnut hole is reducing each year. So in 2014:
- You'll receive a 52.5 percent discount on the cost of brand-name and biologic drugs (including insulin and vaccines, contributed by their manufacturers.
- You'll receive a 28 percent discount on generic drugs and Part D-covered supplies used to administer insulin, through a subsidy from the federal government.
Over the next few years these discounts will get larger, so that by 2020 you will pay no more than 25 percent of the cost of any Part D-covered drugs in the doughnut hole.
Who gets the discounts?
Anybody who gets Part D drug coverage and falls into the doughnut hole is entitled to the discounts, including those who are enrolled in:
- A "stand-alone" Part D drug plan — the type mostly used by people in the traditional Medicare program.
- A Medicare Advantage health plan that provides drug coverage.
- A Part D drug plan or a Medicare Advantage plan that is sponsored by a current or former employer or union.
Will people who get Extra Help get the discounts?
No. People with limited incomes who receive low-cost prescription drug coverage under the government-subsidized Extra Help program already have year-round coverage without a doughnut hole.
How do I get the discounts?
You don't need to apply for them or fill out any paperwork. The discounts will be automatically applied at the pharmacy or, if you get your prescriptions through mail order, by your plan's mail-order service.
Does the discount apply to all Part D drugs?
Under the new law, drug manufacturers must provide the doughnut hole discounts on all their brand-name and biologic drugs as a condition for them being covered under the Part D program as a whole. According to Medicare officials, the manufacturers of more than 99 percent of the brand-name drugs used by Medicare beneficiaries have agreed to provide the discounts.
However, if one of your drugs is made by a manufacturer that declines to participate in the discount program, this means that your Part D plan won't cover it at all — not in the initial and catastrophic periods of coverage, not in the doughnut hole, and not in the Extra Help program.
Do the discounts mean it will take me longer to get out of the doughnut hole?
No. The limit on out-of-pocket costs that gets you out of the gap is still in effect — $4,550 in 2014. But the calculation is different. What now counts toward the limit is everything you spent on drugs from the beginning of the year — your out-of-pocket costs (deductible and copays) during the initial coverage period and whatever you spent on drugs in the doughnut hole — plus the 50 percent discounts on brand-name and biologic drugs provided by the manufacturers. The discounts are considered to be out-of-pocket costs even though you didn't pay for them. So if the total amount of all these components is high enough, you reach catastrophic coverage as quickly as you would have done without the discounts.
Example : You go to the pharmacy to fill a 30-day prescription for a brand-name drug while in the doughnut hole. The full price of the drug is $100, plus a $2 dispensing fee. The manufacturer's 52.5 percent discount is applied, bringing the price down to $47.50. You pay this amount plus the $2 dispensing fee. The discount does not cover this fee. But the whole amount of $102 (the full price of the drug plus the dispensing fee) counts toward getting you out of the doughnut hole.
However, the discount on generic drugs that is provided by the government does not count toward the doughnut hole limit.
Also remember that, as in all previous years, what you spend on drugs in the doughnut hole only counts toward the limit if you buy them through your plan and from a pharmacy in your plan's network, except in emergencies and a few other circumstances that Medicare allows.
My plan doesn't normally cover one of my drugs but agreed to cover it because it was medically necessary for me. Will I get a discount for this drug in the gap?
Yes. If a plan grants coverage for a drug that's not on its formulary — usually in response to the patient's doctor's request for an exception to its rules — this drug is considered a covered drug for the purpose of discounts in the doughnut hole and counts toward the dollar limit that gets you out of the gap. But no exceptions can be granted for a drug made by a manufacturer that does not participate in the discount program.
What if my plan already gives some coverage for my drugs in the gap?
Your plan's coverage is applied first, and the discounts are applied to the remaining amount.
Example: You are enrolled in an "enhanced" Part D plan that covers 40 percent of the cost of your drugs in the gap. You go to the pharmacy to fill a prescription for a brand-name drug that costs $100. The plan pays $40 of this amount, leaving $60 as your share. But after the manufacturer's discount is applied, you pay $28.50 plus a dispensing fee of, say, $2. The $40 that the plan paid does not count toward the spending limit that gets you out of the doughnut hole. But the rest — the whole $62 — does count.
What if I'm enrolled in a state pharmacy assistance program?
You still get the discounts in the doughnut hole. They will be applied to the price of your drugs before the state assistance kicks in. This is also true for other programs that provide help to pay for Part D drugs, except for Extra Help.
What if I already get assistance from a drug manufacturer?
You should check with the manufacturer's patient assistance program to see if its policy has changed.
How will I know if the proper discounts have been applied?
An explanation will be included in the regular statements you receive from your plan. If you have reason to think that you haven't received the correct discounts, call the number shown on your plan membership card. If you disagree with the plan's explanation, you can use the standard appeals process to resolve the issue. You can also call Medicare at 1-800-633-4227 to file a complaint.
Patricia Barry is a senior editor for AARP Integrated Media and the author of “Medicare For Dummies” (Wiley/AARP, October 2013).