Medicare Donut Hole

2014 Medicare and Medigap Updates

A number of seniors often express confusion and anger with their Medicare plans, especially when they realize that they have fallen in the Medicare donut hole. If you are new to Medicare, then you probably don’t know about Medicare or the infamous Medicare donut hole. However, you should be aware of what it if you plan to choose Medicare Part D, the Prescription Drugs program.

Medicare is the national health insurance program whose benefits start once the beneficiary reaches 65. The Medicare program is normally distinguished by four parts, Medicare Part A, Medicare part B, Medicare Part C and Medicare Part D.

Individuals who choose to be beneficiaries of Part D need to be aware of the coverage gap, commonly referred to as the Medicare Donut Hole. Individuals fall into the coverage gap when the cost for their prescription drugs reaches $2,970. It should be noted that this figure is the total retail cost of all your covered medications. As such, it reflects your share of the cost for the covered drugs as well as what your insurance company pays for the same.

After you pass this initial limit, you will be required to pay half of the cost of brand name drugs and approximately 14% of the cost of generic prescription drugs while you lie in the Medicare donut hole. Once your total out-of-pocket costs reach $4750, you now qualify “catastrophic coverage”. At this point, you are only responsible for 5 percent of your prescription drug costs for the rest of the year while your Part D plan pays off the rest. Moreover, this $4750 limit does not include the portion of prescription drugs paid by your insurance carrier or any of your monthly part D premiums; it reflects only your true out-of-pocket expenses. It should be noted that if your receive “Extra Help” which is a Medicare program that helps some individuals with limited income or resources pay for their prescription drugs, you will not have a coverage gap, hence the discounts listed above do not apply.

These changes in what you pay may certainly cause confusion as to what you are required to pay for your prescription drugs. As such, a number of individuals start tracking their retail costs for prescription drugs in order to know when they fall into the Medicare donut hole. However, your Medicare Part D plan provider will gather all your retail costs and watch where you are with respect to the coverage gap. Moreover, each month your Medicare part D provider should send you a statement detailing the Explanation of Benefits which should give an overview of your spending as you approach the Medicare donut hole.

If you are approaching the age for Medicare or are already on it, be sure you know about the things it does not cover. Although Medicare is a very good retirement plan, it usually only covers around 80% of total medical cost, so it may be a good idea to carry a Medicare supplement plan called Medigap. It is not that costly and protects you against the Medicare donut hole and many other out of pocket expenses that can cause you to dig into your savings.