Part D Donut Hole is Closed, But Does That Mean It’s Going Away?

Rosanna (68) takes more than a dozen medications regularly to treat high blood pressure, heart disease, acid reflux, and other chronic problems. She signed up for Medicare Part D prescription drug coverage a few years ago, hoping to keep her costs down as much as possible. She knew then that there would be no avoiding the “donut hole,” where she would have to pay more out-of-pocket (OOP) for the cost of her prescriptions until she reached the yearly limit. Once she spent up to the yearly limit, her coverage gap ended and her drug plan helped pay for covered drugs again.

This year, big changes are coming for the Medicare donut hole as the U.S. Congress attempts to close the coverage gap. What are these changes and how may they affect you? Before we answer that question, let’s examine some ways to reduce your prescription costs.

Prescription Drugs Too Expensive? There are Things You Can Do to Bring Your Costs Down

There are a variety of things that you can do to help bring the cost of prescriptions down. Here are some other ideas to help:

• When selecting a Medicare prescription drug plan, verify that a plan covers the medications that you use. It’s always a good idea to compare multiple plans to find the one that’s right for your individual needs. Use the Medicare website to search for a plan that’s right for you.
• Compare a Medicare Part D with a Medicare Advantage Plan (Part C). Medicare Advantage plans include health care and drug coverage on one plan and sometimes other benefits like dental and vision.
• Consider switching to generic drugs: These are often less expensive than brand-name drugs. If you’re taking a brand-name drug, ask your doctor about generic drugs that can work just as well.
• Choose a plan with additional coverage during the donut hole: Some Medicare plans may provide additional coverage while you’re in the donut hole. However, you may be subject to higher premiums.
• Look into state pharmaceutical assistance programs: Many states offer programs that can help with the cost of your prescriptions. Medicare has a helpful search tool to find programs in your state.
• Check for pharmaceutical assistance programs: Many pharmaceutical companies offer assistance programs for people that need help with the cost of their medication.
• Apply for Medicare Extra Help: Individuals that have Medicare drug coverage and have limited income and resources may qualify for Extra Help. This helps to pay for premiums, deductibles, and copayments associated with a Medicare drug plan.

What are the New Rules for the Medicare Donut Hole in 2020?

Although the donut hole will still be around in 2020, it will be slightly more affordable. In 2020, brand-name and generic drugs will both be limited to a 25% coinsurance during the donut hole.

Another change that became effective January 1st, 2020 is the spending limits that get you into and out of the donut hole. In 2020, once you and your plan have spent $4,020 for the year (including your deductible), you will move into the donut hole. After you and your plan reach $6,350 for the year (including the $4,020), you will move out of the donut hole and into catastrophic coverage.

Here are some additional facts about the donut hole in 2020

• Since the Affordable Care Act passed back in 2010, the donut hole has been slowly closing. It used to be that when you hit that point, you would pay 100% of the costs of your prescription drugs while you were in the gap. However, the government has been reducing that percentage steadily, and as of 2020, the amount you pay for brand name prescriptions is no more than 25% before the gap AND in the gap. Generic drugs can still be slightly higher in the gap but as of 2020, they will also be at 25%.
• Anyone with Part D prescription drug coverage will qualify automatically for this discount when their total drug costs hit $4,020.
• This benefit comes with Advantage plans with drug coverage, or a stand-alone Part D drug plan.

Below are the Medicare Part D costs before and after reaching the donut hole discount:

Part D changes for 2020 are:

• Initial Deductible increased by $20 from $415 in 2019 to $435 in 2020.
• Initial Coverage Limit increased by $200 from $3,820 in 2019 to $4020 in 2020 where the 2020 “Donut hole” begins. Generally speaking, this means that you’ll be able to get more medications before you fall into the donut hole when must pay more yourself.
• Out-of-Pocket threshold cost or (TrOOP) increased from $5,100 in 2019 to $6,350 in 2020. This is up from 2019, meaning that you’ll have to pay more out-of-pocket than before in order to get out of the donut hole.
• Part D enrollees will receive a 75% donut hole discount on the total cost of their brand-name drugs purchased while in the donut hole. The discount includes a 70% discount paid by the brand-name drug manufacturer and a 5% discount paid by your Medicare Part D plan. The 70% paid by the drug manufacturer combined with the 25% you pay, count toward your TrOOP or donut hole exit point. For example, if you’re in the donut hole and a covered brand-name drug costs $40, you’ll pay 25% of this cost OOP, which is $10. The manufacturer discount will be 70%, or $28. This totals to $38. This amount of money will count toward your OOP costs for getting out of the donut hole. The remaining $2 won’t count.
• For generic drugs, only the amount you actually pay counts toward your OOP threshold. For example: If you’re currently in the donut hole and a covered generic drug costs $40, then you’ll pay 25% of this cost OOP, which is $10. Only this $10 will count toward your OOP costs for exiting the donut hole. The remaining $30 won’t count.

• After you exit the donut hole, you’ll receive what’s called catastrophic coverage. This means that you’ll have to pay whatever is greater for the rest of the year: 5% of a drug’s cost or a small copay. Generic drugs minimum copay is $3.60, while brand-name drugs minimum copay is $8.95.
• The donut hole isn’t going anywhere. For the foreseeable future, even after the coverage gap is gone, everyone on Part D will still have the same level of cost sharing — about 25% — from the time you meet your deductible until the time you reach catastrophic coverage.

Planning in Advance for Long-Term Care

Prescription drugs are expensive. So is long-term care. In fact, nursing home care in the DC Metro area costs a whopping $12,000 – $14,000 a month. As you can imagine, the significant costs of long-term care can impact retirement plans, savings, and assets, and the level of care one receives. That’s why it’s so important that people speak with an experienced elder law attorney, such as the attorneys at the Farr Law Firm, about long-term care preferences and to put a plan in place.

Medicaid Planning for Long-Term Care

Medicaid planning can be started while you are still able to make legal and financial decisions or can be initiated by an adult child acting as agent under a properly-drafted Power of Attorney, even if you are already in a nursing home or receiving other long-term care. In general, the earlier someone plans for long-term care needs, the better. But it is never too late to begin your planning.

To begin long-term care planning (and incapacity and estate planning) right away, please call us now to make an appointment for an initial consultation:

Elder Law Fairfax: 703-691-1888
Elder Law Fredericksburg: 540-479-1435
Elder Law Rockville: 301-519-8041
Elder Law DC: 202-587-2797