Finding high-quality healthcare coverage is a top priority for any client nearing retirement age. Medicare is the coverage source for nearly all Americans over age 65, so the focus for seniors is finding a combination of Medicare products that meet their needs.
While major medical coverage is critical, agents often find that prescription drug coverage is what most concerns their clients. Many seniors take multiple medications and refill them monthly, making the cost of medicine a crucial consideration for those already on a fixed income.
Medicare-eligible seniors are particularly concerned about how the Medicare Part D coverage gap – the so-called “donut hole” – will impact their costs at the pharmacy. They have good reason to be anxious: Having a period of no or reduced prescription coverage in their plan could be disastrous for a client’s finances and health.
Read on to learn about what the coverage gap is and what it means for Medicare prescription costs.
What is the Medicare Donut Hole?
The coverage gap or donut hole is a period during which costs for prescriptions are temporarily higher. This donut hole is one of the four phases of coverage in a Medicare Part D plan:
- Annual Deductible: In this phase, the beneficiary pays the full cost of their medications. Deductible amounts vary, and some Part D plans have no deductible. The maximum deductible amount for 2021 is $445.
- Initial Coverage Period: This period starts after the deductible has been met and ends when the combined total spent by the member and plan reaches a certain amount. (For 2021, the amount is $4,130.) During this period, the member pays the copayment or coinsurance amount specified in their plan.
- Coverage Gap (Donut Hole): The period when the total spending for prescriptions for the member and the plan reaches the catastrophic amount for the year ($6,550 for 2021). While in the donut hole, the member may pay a higher portion of their prescription costs.
- Catastrophic Coverage: Once total prescription costs reach the catastrophic limit, the member’s costs drop significantly to 5% of the plan price.
The Affordable Care Act and the Donut Hole
When Medicare Plan D was introduced, the coverage gap required seniors to pay 100% of their drug costs until they reached a catastrophic level. As a result, many seniors were unable to afford their medications.
The Affordable Care Act required additional coverage for seniors during their coverage gap period. Now seniors pay no more than 25% of the full price of medications during the coverage gap. The other 75% of costs are split between the plan and the prescription drug manufacturer.
Is the Coverage Gap Something Seniors Should Worry About?
Seniors should be aware of the coverage gap and plan for it. Even though their price out-of-pocket is now limited to 25% of the total cost, that still could mean hundreds of dollars a month.
A small number of Part D plans do not have a coverage gap, but those plans have much higher premiums and are not widely available. Those enrolling in Medicare Part D should assume they will have a coverage gap period in their plan.
Final Thoughts
While Medicare prescription benefits can be complicated, the right information can turn a client’s worry into confidence. By doing personalized research and understanding the changing laws, agents can guide seniors to coverage that meets their needs and budget.
How Do I Learn More?
To learn more about Medicare prescription drug benefits and how to find the best plan for your client, visit Key Retirement Solutions. Having an in-depth understanding of the senior health insurance landscape will allow you to provide the highest level of service and establish a fulfilling career.
