Medicare Part D is the part of Medicare that covers your prescription drugs. This coverage is available either through a standalone prescription drug plan or a Medicare Advantage (Part C) plan. These plans renew and reset annually, on January 1.
So, what is this "donut hole" term you keep hearing being thrown around? The donut hole is one of the four phases of Medicare Part D. What many don't realize is that the Part D program is not funded by premiums. Instead, it is funded mostly through the Medicare program.
In order to keep the Part D program sustainable, Medicare had to find a way to convince beneficiaries to choose generic drugs over brand-name drugs. That's why Medicare created the donut hole, also known as the coverage gap.
When the donut hole (or coverage gap) was first created, beneficiaries had to pay 100% of the cost of their medication. In order to avoid the donut hole, beneficiaries would switch to the generic version of their brand-name medications.
Yet, there isn't a generic version available for all medications. Thus, beneficiaries who couldn't find a generic version could be put in a financial bind once they reached the donut hole. Thankfully, legislation has stepped in and reduced the amount that the beneficiary must cover from 100% to 25%.
Now that you know why the donut hole was created, let's go over the four phases of Medicare Part D.
Phase 1: Deductible Phase • Part D plans come with an annual deductible • You pay the full cost of medications until the annual deductible amount is reached • It's possible that the deductible won't apply to you if you're taking generic medications or tier 1 and 2 medications • However, if you take brand-name medications that are tier 3 or higher, you will likely have to pay the full cost of your medication until you reach the plan's deductible amount
Phase 2: Initial Coverage Phase • You only have to pay a set coinsurance or copay set by your drug plan • How much you pay in coinsurance and copays will depend on what tier your prescription fall within • Tiers vary from one drug plan to another – you can find these tiers in your plan's drug formulary • Most beneficiaries stay in this phase until their plan renews the following year (~85%)
Phase 3: Donut Hole (Coverage Gap) Phase • Most people do not ever reach this phase • You fall in the coverage gap (donut hole) after a certain spending amount reaches a set threshold • The total amount includes both what you pay for your medication and what your insurance pays for the medication • While in the donut hole, you will have to pay 25% of the full cost of your medications (both generic and brand-name) • While in the donut hole, what counts towards your True Out-of-Pocket cost includes the amount paid towards your deductible, any copays/coinsurance paid while in the initial coverage phase, the full cost of brand name drugs while in the coverage gap, and the amount paid for generic drugs while in this phase
Phase 4: Catastrophic Coverage Phase • When your True Out-of-Pocket cost (TROOP) reaches a certain amount, you reach this phase • While in this phase, your costs for medications usually go down • In the catastrophic coverage phase, you only pay around 5% of the cost of your medication
Now that you understand the four phases of Part D, it's important to know that these plans change annually. So, during the annual enrollment period (from October 15 through December 7), you'll want to compare all the plans in your area to make sure you're saving the most money possible.
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If you're a Medicare beneficiary, you may have heard of the term donut hole. Unfortunately, the Medicare donut hole is not as sweet as a donut you eat for breakfast. Hi Medicare Community. My name is Lindsey Engle, Im the Medicare expert for Elite Insurance Partners and MedicareFAQ.com. Medicare Part D is the part of Medicare that covers your prescription drugs. Medicare Part D is available through either a standalone prescription drug plan or through a Medicare Advantage plan. These plans do renew and reset annually on January 1st. So what is this donut hole term that you keep hearing thrown around? Well, it's one of the 4 phases of Medicare Part D. What many don't realize is that the Part D program is not funded by premiums, but it's funded mostly through the Medicare program. In order to keep the Part D program sustainable, Medicare how to find a way to convince beneficiaries to choose generic drugs over brand name drugs. That's why Medicare created the donut hole, also known as the Coverage Gap. When the donut hole was first created, or the coverage gap, beneficiaries had to pay 100% of the cost of their medications. In order to avoid the donut hole, beneficiaries would switch to the generic version of their brand name medications. However, not all medications have a generic version available. for those beneficiaries who could not find a generic version it really put them in a financial bind. Thankfully legislation had stepped in and reduced the amount from 100% down to 25%. Now that you know why the donut hole was created. Let's go over the 4 phases of Medicare Part D. The first phase we're going to go over is the Deductible Phase. Part D plans come with an annual deductible. You pay the full cost of medications until you reach the annual deductible amount. Most beneficiaries don't realize that even though their plan does have a deductible listed, that if they're taking generic medications or tier 1 and 2 medications, it's quite possible that the deductible will not apply to them. However, if you're taking a brand name medication that's tier 3 or higher, then you'll likely have to pay the full cost of your medication until you reach the plans deductible amounts. The second phase is the Initial Coverage Phase. After you've met your deductible, you are now in the Initial Coverage Phase while you're in the Initial Coverage Phase, you only have to pay a set amount of coinsurance or co-pay that was set by your drug plan. How much you pay in coinsurance and co-payments will depend on what tier your prescriptions fall in. These tiers do vary from one drug plan to another. You can find these tiers in your plans drug formulary. The Initial Coverage Phase is where most beneficiaries end up staying until their plan renews at the beginning of the following year. Now, the third phase is the Donut Hole Phase also known as the Coverage Gap. What's important for beneficiaries to know is that most people do not ever reach the Donut Hole or the Coverage Gap. Around 85% of Medicare beneficiaries will end up staying in the Initial Coverage Phase. You'll fall in the Coverage Gap after a certain spending amount reaches a set threshold. Once the total cost of your medication reaches the set threshold amount while in the Initial Coverage Phase you'll enter the Donut Hole or the Coverage Gap. The total amount includes both what you pay for your medication as well as what your insurance pays for the medication. While in the Donut Hole, you'll have to pay 25% of the full cost of your medications for both generic and brand name drugs. The 4th and final phase of Medicare Part D is the Catastrophic Coverage Phase. Once your True Out-of-Pocket cost, or your TROOP, reaches a certain amount you'll reach the Catastrophic Coverage Phase while you're in the Donut Hole, what counts towards your True Out-of-Pocket cost include the amount you paid towards your deductible, any co-pays or coinsurance you paid while in the Initial Coverage Phase and the full cost of brand-name drugs while in the Coverage Gap or the Donut Hole, as well as the amount you paid for any generic medications while in the Donut Hole. Once you reach the Catastrophic Coverage Phase your cost for your medications will go down. In this phase, you only pay around 5% of the cost of your medications. Now that you understand the 4 phases of Medicare Part D, its important to know that these plans do change annually. That's why during the Annual Enrollment Period, which runs October 15th through December 7th, youll want to compare all the plans available to you in your area to make sure you're always saving the most amount of money. Thank you so much for taking time to watch our video today. We hope you found it helpful. If you have any questions regarding the Part D coverage phases or Medicare at all, make sure to post them below. Well answer as soon as we can. If you haven't already subscribed to our YouTube channel, make sure to do so today. Make sure notifications are turned on so you're notified every time we post a new video. We also have a fantastic medical community on Facebook. Well make sure to include a link in the description below so that you can join. Until next time. Bye.