The Medicare Part D Donut Hole (Coverage Gap) is of the things that is most confusing, frustrating, and daunting to our Medicare clients when they try to understand their Medicare Prescription Drug Coverage or Medicare Part D coverage. This is because the Donut Hole works in a very counter intuitive way. It is especially befuddling for seniors who previously had insurance through their work, private health insurance like Covered California or through Medicaid or Medi-cal. Today we are going to go over the basics of how Medicare Prescription drug plans / Medicare Part D plans work and do our best to tackle the Medicare Part D Donut Hole. Before we do that do not forget to like and subscribe.

What is Medicare and what does it cover 

• Medicare is a health insurance program for seniors and disabled people 
• Everybody pays into it while working 
• Meant to provide healthcare when no longer able to work
• Most people are eligible for Medicare coverage at the age of 65 
• Automatically get the red white and blue Medicare card three months before  65 birthday
• Medicare is made up of two parts
• Medicare Part A which is for Hospitalization 
• Medicare part B which his for Medical services
• For most people there is not a cost for Medicare part A, it  already been paid into all the years when working 
• But Medicare Part B premium changes every year or so
• In 2020 the Medicare Part B premium is $144.60 cents
• The Medicare Part B premium will usually come out of somebodies Social Security Retirement check automatically

 Prescriptions Drugs not covered by Medicare Part A or Part B

• Medicare Part A and Part B does not cover everything 
• One of the main things not covered by Medicare is prescription drugs  

• If somebody has Medicare part A and B or Medicare part A or B only they will find that their prescription drugs are usually not covered under either Part A or B
• Part A may cover some of the drugs received while in the hospital
• Part B may cover some of the drugs that are administered in the doctor’s office
• These drugs can be cancer drugs or other injectables that require doctor’s supervision
• In general, neither Medicare Part A nor Part B will cover normal prescription drugs
• If you have Medicare and Medicaid, neither Medicaid nor Medicare will cover your prescription drugs either
• This can be a big surprise for people coming out of Medicaid and moving onto Medicare with Medicaid
• People choose to get Part D coverage to get help paying for their prescription drug coverage

Part D Coverage 

• Part D coverage is standalone coverage only for prescription drugs
• Part D is a plan offered by a private health insurance company to cover drugs. 
• Medicare itself does not offer a Part D plan
• Part D plans have a monthly premium that can vary from plan to plan but is usually around 40$ a month
• This premium is paid on top of any Medicare monthly premiums 
• If somebody has Medicaid and Medicare 
• Medicaid may pay for some or all the monthly Part D premium

Medicare Prescription Drug Coverage and Donut Hole

• Medicare Part D plans have four main stages 
• Stages: Deductible, Initial Coverage, Donut hole and Catastrophic
• Medicare Beneficiaries will pass through each stage as their prescription costs add up throughout the year
• For example, lets imagine you have a single, Tier 2 drug, that has a retail cost of $100. 
• First stage is the deductible

• • In this stage Medicare Beneficiaries are responsible for 100% of the cost of medications until cost reach the deductible
  • For 2020 the deductible can be as high as $435 a year
  • Meaning you will stay in the deductible stage until your pay the initial $435 for your prescription drugs.
  • Each time purchase a prescription drug will pay $100 while in the deductible stage
• Second stage Initial Coverage stage 
  • Once prescription costs are over $435 within a year then will start paying a copay for each prescription drug
  • This copay is based on the tier level of the drug 
  • There are 5 tiers that drugs can fall into
  • 1 and 2 are usually the least expensive tier 4 ,5 usually more expensive
  • Will pay copay and the part D plan / insurance company will pay the remaining cost of the drug
  • For example, if tier 2 drug, has an actual cost is $100, it would cost the 5$ copay and the insurance company would pay the remaining $95 
  • You will stay in this section until the total cost of your drugs including how much is paid during the deductible stage, and how much is paid in copays is equal to $4020 for the year

•  Coverage Gap Phase or “Donut Hole” 

• • In this phase will pay 25% of the cost of medications
  • This can be much higher than the copays paid in the initial coverage stage
  • With that same tier 2 medication for 100$, if in the coverage gap will now be $25 dollars for the same prescription rather than just the $5 copay
  • This will continue until the total amount of money including how much was paid from the: deductible, Copays and 25% during the donut hole is equal to $6,350 for the year
  • The part of the year where your cost of medications increase, and total cost go from $4020 up to $6,350 is called the “Donut Hole”
  • Once the total yearly cost has reached $6,350 then enter last stage which is the Catastrophic Stage

• Catastrophic stage 

• • Cost will drop down again, meaning through the donut hole
  • Costs will either be 5% of the cost of the drug
  • Or $3.60 for generic drugs 
  • Or $8.95 for all other drugs
  • This will continue until the end of the year when the process starts over again

Thank you so much for watching, if you have questions about your Medicare or Medicare health plan options please feel free to contact us and we can make a new post or video to cover your questions. We here at California know health insurance weather it is private health insurance, Medicare, Medicaid / Medi-Cal, MediGap or health insurance for your small business. It can be very confusing coming from your work insurance and trying to look at options on the private market or turning 65 and trying to figure out which Medicare option is best for you. That is exactly what we can do, we can walk you through your options and help you find the plans that fits your needs and your budget.