Bye-Bye Medicare Donut Hole! 2019 is the Year
Ever since Medicare Part D rolled out in 2006, beneficiaries with high drug expenses have dreaded the Medicare donut hole. While we have been grateful to have drug coverage (since people on Medicare prior to 2006 did not), we still dread that part of the year when our medications become more expensive because we have the Medicare donut hole, or coverage gap.
When Part D was created, beneficiaries originally paid 100% of the cost of their brand-name drugs when they hit the coverage gap.
Under the Affordable Care Act, this coverage gap has slowly been closing each year up until 2020. However, under the new Bipartisan Budget Act, the 2019 donut hole will close for brand-name medications at the end of this year. Beginning in 2019, the Medicare donut hole will only affect generic medications.
This is welcome news to Medicare beneficiaries who routinely experience high brand-name prescription medication costs each year.
Medicare Donut Hole is Closing in 2019 for Brand-Name Meds
So why is Medicare Doughnut Hole closing in 2019? Well, this gap in the Part D coverage was originally created to get seniors’ participation in keeping drug costs low. Having a coverage gap encourages individuals to ask for generic drugs whenever possible. This keeps costs down for both Medicare beneficiaries and the federal government.
However, for those people with illnesses requiring brand-name medications, the Part D coverage gap has often been a hardship. There are many new medications on the market that are years away from their patent expiring. Some of these medications work so well that there aren’t very good alternatives.
This has resulted in Medicare beneficiaries having to choose between medications that work but cost a fortune and less expensive medications that maybe don’t work quite as well. If people choose not to take their medications during the gap because they can’t afford them, this could potentially result in higher costs to Medicare down the road when subsequent further illness occurs.
Having helped Medicare beneficiaries with Part D drug plans since the program’s inception in 2006, I have seen many people make these difficult choices. Our Client Service Team here is constantly researching options for our clients. Often we help them check into manufacturers discounts to try to find some financial relief.
The gap has certainly been effective in helping people see the value of generic drugs. However, there has always been a certain percentage of the Medicare beneficiary population who really have no choice because the alternative medications just don’t work as well.
That’s where the Bipartisan Budget Act of 2018 should help. Read on to find out how and when the coverage gap will be eliminated for brand-name drugs.
Shifting the Cost to the Drug Companies in 2019
Right now in 2018, Medicare beneficiaries hit the coverage gap when their total drug spending for the year reaches $3750. They then enter the gap and pay a higher percentage of the cost of their medication until they reach catastrophic coverage when their spending for the year reaches $5000. Afterward, the insurance company must cover 95% of the cost of their covered medications for the rest of the year.
Receiving catastrophic coverage is great, but getting there is tough on your wallet.
The 2018 Medicare Part D Donut Hole
Under the current Part D standard model structure, Part D plans have an annual deductible and then you enter the Initial Coverage level. During this stage, the plan pays at least 75% of the cost of your medications (and you pay the other 25%) until you hit the coverage gap. Once in the gap, you pay 35% of the cost of brand-name drugs and 44% of generics in 2018. Catastrophic coverage kicks in when you have spent $5000 out of pocket. Thereafter you pay only 5% of the cost of your medications.
The higher percentage for generic drugs isn’t the issue, as those are low-cost to begin with. It’s the higher percentage that seniors pay toward brand-name medications in the gap that has been the killer.
It’s important to mention here that the Part D standard model structure is the bare minimum that drug plans must provide. In many cases, Part D carriers may offer better or richer benefits than this bare minimum. For example, you might find many carriers that offer you a flat copay during the Initial Coverage Level before switching to a percentage when you reach the gap.
The 2019 Medicare Part D Donut Hole
Under the new budget deal, Part D plans must continue to pay 75% of the brand-name drug expenses until a beneficiary reaches the catastrophic limit. The legislation thus figuratively “closes” the doughnut hole by requiring some drug manufacturers to bear more of the costs for Part D enrollees when they reach the gap. Enrollees will only pay 25% of the cost of their brand name prescriptions.
So while technically the Medicare coverage gap 2019 is still a stage of Part D plans, you will no longer pay more than 25% (the Part D standard) on your brand-name medications when you reach the gap. You will pay 37% of the cost of generics in the gap next year. But again, the generic drugs, which already have lower costs, have not been the hardship for people in the gap.
The drug manufacturers will foot the bill for this. In 2018, these manufacturers absorb only 50% of the cost of these brand-name medications in the gap. Beginning in 2019 under the new legislation, these companies will now take on 70%. Some of the costs of those drugs have been shifted back to the manufacturer.
As we mentioned above, 75% of the cost of your drugs is the bare minimum that your plan must cover during the Initial Coverage Level stage and the Coverage Gap stage. Many plans may voluntarily choose to do better than this. Example: it’s possible that a drug with a $100 retail price might have a $10 copay during the Initial Coverage Level. Then when you reach the gap, the cost of that drug may revert to the standard minimum of 25%.
This should still be looked at as a WIN. You enrolled with a carrier that gives you the standard 25% coinsurance during the gap but adds even more value by giving you an even lower copay during the earlier Initial Coverage stage. Either way, the 25% that you pay for brand name drugs in the gap is still the lowest cost for brand name drugs in the gap that plans have ever been required to give you.
Potential Outcomes for Closing the Donut Hole
It remains to be seen how this change might affect 1) the cost of the medication themselves and 2) the cost of the Part D drug plans in 2019. We are hopeful that this change will be a positive one. We have many clients who will be happy the Medicare donut hole is going away.
The bill also repeals caps on rehabilitative services and expands Medicare’s ability to offer tele-medicine services. It also does away with the Independent Payment Advisory Board – the so-called “death panel” created by the Affordable Care Act.
Medicare Advantage plans got welcome news too. They will now offer a wider choice of supplemental care management options for chronically ill individuals
To help fund the budget deal, high-income Medicare beneficiaries earning more than $500K individually or $750K as a married couple will pay more for Parts B and D than they do now.
Boomer Benefits clients can expect an annual Clients-Only webinar in October 2018. As usual, we’ll go over the upcoming changes and explain how they will work. Would you like to work with an agency that offers annual free webinars to keep clients up to speed? How about free claims support? We offer that too.