To learn about the coverage gap for Part D, you must understand the first two coverage stages.
Donuts are a delicious treat that everyone enjoys. However, the Medicare Part D “donut hole” has nothing to do with the tasty, carb-laden treat that we all know and love. The “donut hole” is the term used every day to describe what is officially known as the “coverage gap” within Medicare Part D. If you are looking into Medicare Part D, then you’ve come to the right place to learn more about the coverage gap. However, to understand the coverage gap, you have to understand Medicare formularies first. Read on to learn more about the Medicare Part D coverage, the coverage gap, and how formularies work.
What Exactly is Medicare Part D
Medicare Part D is the part of Medicare that deals with prescription drug coverage, which isn’t a primary benefit of Original Medicare Parts A and B. Congress designed Medicare Part D to help cover the costs of prescription drugs for individuals enrolled in Medicare. They structured it as follows. There are different stages of coverage according to how much a Medicare Part D policyholder spends on their unique medications, which a medical doctor personally prescribes them. During these stages, the cost-sharing for the drugs will depend on many factors. These factors include the price that the Medicare Part D insurance carrier you have chosen sets for the cost of the drugs you take during each period. This is called a formulary. Each formulary differs according to the Medicare Part D Insurance company’s unique setup.
How is a Formulary is Created?
Here is how a formulary works. The formulary sets a price for prescriptions covered, and a listing of the prescriptions that the company will include as a drug on their unique formulary. Medicare Part D insurance companies are required to put at least two drugs in the most commonly prescribed categories and classes. The formulary also might have a preferred pharmacy network of pharmacies that will offer a better cost-sharing pricing structure than a non-preferred pharmacy.
The Coverage Gap Stages
There are four stages to your Medicare Part D coverage. The four steps are as follows:
- The Deductible Period
- The Initial Coverage Period
- The Coverage Gap (Donut-Hole) Period and
- The Catastrophic Stage Period.
How Each Period/Stage Develops
The Deductible Period/Stage
In your deductible stage, if the plan you have chosen has a deductible, you are paying off the deductible. This means that you are responsible for the whole cost share, up until you reach your deductible threshold, per your specific plans, guidelines, and requirements.
Initial Coverage Stage
During the Initial Coverage Period stage, you and the insurance company will have an amount that you pay as a cost-share. The amount you are responsible for will be in the form of a copay or co-insurance and will be an amount that you are liable to pay, at a pharmacy, when picking up your prescriptions. The copay will depend on the formulary price that was set by your insurance carrier, for the unique prescription. The prescription might be offered in the form of a brand name drug, or generic drug, and might have a lower cost according to the price of the prescription being offered.
During this stage, according to the formulary’s price, the insurance company will set a copay price for the unique individual prescription, and each medication will have a fixed amount on the formulary. Usually, the insurance company sets the price as a tier rating according to their formulary. The formulary also sets a price to the total cost the insurance company has to pay for the prescription, and according to how much in total, the pharmacy you have chosen to pick up the medication from, is charging for the prescription. This is used to tally up the total cost paid by you, the Medicare Part D policyholder, and the Medicare Part D insurance carrier. The expenses are tallied by CMS every time you pick up a prescription, so they can know which coverage stage the Medicare Part D policyholder is positioned in. In this initial stage, once the prescription amounts that you and the Medicare Part D insurance carrier has paid, reaches $4,130 in the year 2021, you fall into the next stage.
Keeping all of this information in mind is necessary to understand the Coverage Gap and the Catastrophic stage.
Independent Healthcare Insurance Brokers You Can Trust
Healthcare American is an independent insurance broker that you can trust with all of your personalized retirement planning needs. We provide customers with healthcare, life insurance, and retirement plans, tailored to their personal needs and individualized situations! We will provide the best insurance plans and tailor-made retirement plans to those living in the Baltimore, Washington DC, Virginia, Delaware, and Pennsylvania areas!
For more information and a free online quote, visit our website, send us an email, or give us a call at (443) 537-0555.
Don’t forget to follow us on Facebook, Twitter, Google My Business, and Pinterest!