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For those with a Medicare Part D stand-alone prescription drug plan or a Medicare Advantage plan that includes prescription drug coverage, it’s important to understand exactly what the coverage stages are. Prescription benefits can go through four stages within a calendar year, and the different stages determine how much you pay out of pocket. Specifically, the third stage, also known as the “coverage gap” or “donut hole”, is the most complex part of the plan. This guide outlines how it works. 

What Is the Coverage Gap?

The Medicare coverage gap describes the period in which your prescription drug plan has entered specific cost stage. You might have heard that the gap is “closed” as of 2020. Some people mistakenly think this means they no longer need to pay for medication except for their copays/co-insurance. While the Affordable Care Act shrank the gap significantly, Medicare recipients still need to cover a share of their drug costs during this stage.

In 2021, this occurs once your total cost of medications(the retail price) has reached the initial coverage limit, which is $4130. While in the donut hole, the prescription drug plan will temporarily provide limited coverage, leaving you to pay more for medications than you did in the earlier stages.  If you reach this coverage gap, you’ll be responsible for covering 25% of both generic and brand-name drugs. The manufacturer will pay 70% of the cost for brand-name drugs, your plan will pay 5%, and you will pay 25%. For generics, your plan will pay 75%, while you pay 25%. People who don’t take many expensive medications, have drug coverage from an employer, or are enrolled in the Extra Help program won’t enter the donut hole.

How to Get Out of It

prescription drug plans

You must spend $6,550 in retail costs for your prescriptions to exit the donut hole. Eligible spending includes the amount you and the drug manufacturer pays for prescriptions, your deductible, the amount you paid during the initial coverage period, and any amounts paid on your behalf. Other amounts paid by assistance programs such as the AIDS Drug Assistance Program, Indian Health Service, and State Pharmaceutical Assistance Program are also eligible.

Monthly premiums, non-covered drugs, the 75% manufacturer discount on generic medications, and any prescriptions that come from a pharmacy outside your plan’s network won’t count toward your retail out-of-pocket costs. After reaching $6,550, your prescription drug plan will enter the catastrophic coverage stage, where you will only pay 5% of the cost of medications, or a fixed amount — whichever is greater. The set amounts are $3.70 for generics and $9.20 for brand-name drugs.

 

To make sure you get the best coverage possible for your prescription needs, turn to The Clemente Agency in Gilbert, AZ. These Medicare advisors specialize in helping clients find supplemental insurance solutions and stand-alone prescription drug plans to help cover the costs of your prescriptions. They’ll evaluate your unique situation and explore the most suitable options to provide you with comprehensive coverage. Call (480) 209-2250 to schedule an appointment, or visit them online to learn more about their services.

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