The Dreaded Donut Hole

Painting excerpt by Edvard Munch / article by s.k.watts updated

Little did the artist Edvard Munch know that this image would be so identifiable to so many on so many levels. It was the first image that popped into my head when I decided to penn some thoughts on the world of prescription coverage.

On the one hand… you won’t need your passport to tour this somewhat frightening realm. All you have to do is begin filling prescriptions, reach a certain point, and just like that you will be whisked off of to a new and somewhat strange destination known as ‘The Prescription Coverage Stages.’ They aren’t technically islands, but it will sometimes feel like you got stranded on one anyway. Your best survival plan is to familiarize yourself with the destination ahead of time and plan ahead if you are able.

To begin with, take note that it is mandatory that every one of us have a prescription plan (Part D) when we become eligible for Medicare and that Both Social Security and the Centers for Medicaid and Medicare are able to identify that we do have this coverage in the prescribed time frame of becoming Medicare eligible. There are long term financial consequences if you cannot prove your prescription coverage within this allotted time frame and it is called a Late Enrollment Payment fee that will follow you forever. Making sure you have prescription coverage when becoming Medicare eligible is one of the things we can control within our healthcare journey. Should you find that you are assigned an LEP (Late Enrollment Penalty) and really did have Part D Prescription Coverage when it was deemed you should have, know that there is a very limited timeframe in which you must complete an attestation that you did have this coverage and have that proof submitted. Timing is very important in all matters related to healthcare these days.

Original Medicare does not cover your normal prescriptions. So you are responsible for deciding how you will accomplish this mandatory and very necessary coverage; either by purchasing a plan that covers Part D prescriptions alone in addition to your Medicare or Medicare supplement, or by choosing a Medicare C plan, which usually includes prescription coverage. A Medicare C plan is a managed care form of original Medicare that combines parts A (hospital) and B (outpatient) and usually includes other health and wellness benefits that you would have otherwise have to pay for separately. You may also continue your journey through a group retiree plan through your employer and will check with them regarding your benefits as they manage their own plans as well.

There are four basic coverage stages in the journey of your medication spending each plan year. They are the Deductible Stage, The Initial Stage, The Coverage Gap, and The Catastrophic Stage. It is the Covergage Gap, or Donut Hole stage we fear wading through on our own…

In order, they are:

The Deductible Stage This is where you will meet the requirements of a deductible if you have one before your insurance begins paying towards your medications. Deductibles will vary with your insurance provider and your qualifications based on income as well as having a limited amount you can be responsible for. You will know what your yearly deductible when you select your prescription coverage plan and should be able to plan accordingly. This is the least scary stage as most of know what to expect.

The Initial Stage

Here you will begin paying any the part you are responsible for and was quoted by your plan. They will vary in cost depending upon what plan you have chosen, any assistance you might be eligible for and whether or not you qualify for dual coverage (Medicare and Medicaid combined). If you have another insurance paying as well, you need to know that your plans don’t double down on paying for your prescriptions like some of us remember happening in the past. One of your plans will be primary and one will be secondary. The secondary plan is usually not responsible for what you primary plan covers.

For the year 2023, you and your paying insurance contribute your separate responsibilities toward your prescriptions until the amount of $4,660 (most plans) has been reached. Your share (percentage of the drug cost) is known as a copay, and coinsurance if applicable. The cost of your medications of course will determine how quickly you complete this stage each year. After reaching that threshold amount you will move into the Coverage Gap or The Donut Hole.

The Coverage Gap Stage. Also known as the Donut Hole

In this stage you will now pay 25% of the cost of your medication until you reach the amount of $7400 which includes your deductibles on medications, copays, and what you are paying for these medications now in the Donut Hole. This is where some of us will find ourselves having to re-examine our medications and discuss alternatives to more expensive medications with our doctors. Some of us won’t be able to afford the higher priced medications here. This is where having money in savings will come in handy at first, but long term might require some serious examination. There are some programs out there for those that qualify financially for assistance in this stage, low income assistance, and many of the manufacturers of the higher cost medications offer an assistance program or discounts. You have to contact the specific manufacturers yourself.

The Catastrophic Stage

Once you have reached that $7400 point you will cross into the coverage level known as The Catastrophic Stage. Here is where you pay a lower cost for your medications than you did in the Catastrophic Stage, with relief, but still a bit more that what you were paying when you were in the Initial Coverage Stage. Usually, 5% of the cost of your medication or a minimum copay, whichever is higher.

My friends and family members have had discussions of late about factoring in future prescription coverage anytime we think about quitting work or deciding if we are financially viable to retire. It’s something that will keep me working for a while. On the days it seems difficult to get out of bed, I attempt to justify my working still by believing I will survive the Donut Hole!

But wait! There’s more!

We should throw in the terms Tiers here for the brave at heart. Tiers are the levels in which medications are classified in regard to cost and payments. The area brand name drugs and a whole other slew of considerations. What you really need to know is that the most common and inexpensive medications that folks use every day fall under Tier 1 or 2 and sometimes have no copay at all with a Medicare C plan. And, you guessed it, the higher the Tier the higher the cost to both the insurance company and to you. There are 5 significant Tiers at present. You can recognize the higher tiers by all the commercials on the airways, and that the manufacturers offer ‘payment assistance’ if you qualify. Many of these can be denied by your insurance company since there are less expensive alternatives. Obviously, in the Donut Hole, the higher tiers can break the bank.

This little article could have been twenty pages long, that is how much there really is to talk about regarding prescription coverage alone. But the important thing to remember here is that each year we will likely have a greater responsibility in what we will be paying toward our healthcare. Some of us won’t be able to do much to change where we are within the financially prepared arena, but some of us might be able to. It is certainly food for thought. Especially when it helps us to realize that eating right, working out as much as possible and taking care of ourselves will go far in keeping the higher priced medications at bay for as long as was possible in some cases.

I for one choose the generic brand of my medications, and I have a renewed outlook at taking care of myself so I might have more options down the road. When I get the urge to splurge on something, I remember that savings even a little bit towards when I will have to face the Coverage Gap or Donut Hole. At which time I will acquire a copy of The Scream and pay it homage while I am getting through the most feared of all the prescription coverage stages.

Donut Hole Workarounds:

Meet with your doctor to discuss generic medications in lieu of brand name when and if possible.

Contact the manufacturer of your more expensive medications directly to see if you qualify for assistance or their discount plan.

Explore using Prescription Discount Cards such as GoodRx (which can prove a great discount on many drugs), WellRx, Single Care Rx, Optum Perks, or SingleCare for future purchases. Each of these will have its own requirements. Your pharmacy should be able to provide you a list with the best discount cards for the prescriptions that you are taking.

There are some programs out there that assist with costs of this coverage stage, but qualification for these is very difficult. They are searchable online.

The only good thing to say about being in the donut hole is that it doesn’t last forever. You will start over at the Initial Stage at the start of the next calendar year (after midnight December 31st) and if you have many high-priced medications you can afford to pay for, you may be in this coverage stage for a shorter period of time. There is some relief when you reach the Catastrophic Coverage Stage as you will pay less of the manufacturer’s retail here.

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