A recent Boston Herald article describes the trouble that some seniors have paying for prescriptions in the Medicare coverage gap, commonly referred to as the “donut hole.” The article tells the story of Judith Pais, who ran out of her medication in November and had to wait until the new year to purchase her prescriptions because the cost of her medications had “skyrocketed” from $120 per month to more than $500 after she entered her Part D plan’s coverage gap.

As the article explains, the coverage gap in 2019 begins after “a patient has spent $3,820 on covered drugs. Once you hit the gap, patients pay 25% of the plan’s cost for covered brand-name prescription drugs and 37% for generics.” Because of the high price of her drugs in the donut hole, Ms. Pais “immediately decided to cancel the prescription and used expired, leftover medication to get her through the rest of the year.”

As the article says, she’s not alone. According to Leigh Purvis with AARP’s Public Policy Institute, “the coverage gap has been slowly closing, but people are hitting the gap sooner and sooner because of sky-high drug prices.” The result is that people struggle to pay for prescriptions and may go without needed medication.

Didn’t the ACA close the coverage gap?

One common misperception is that the coverage gap went away under the Affordable Care Act. Actually, it has slowly closed over a number of years, but consumers still have some cost sharing. In 2020, as stated on the Medicare.gov website, consumers will pay 25% of the cost for both generic and brand name drugs in the coverage gap, which will begin once the consumer and the plan have collectively spent $4,020 on covered drugs and end when the beneficiary’s out-of-pocket limit reaches $6,350.

Interestingly, as Medicare.gov explains, for brand name drugs “95% of the price—what you pay plus the 70% manufacturer discount payment—will count as out-of-pocket costs which will help you get out of the coverage gap.” That’s not the case for generics. “For generic drugs, only the amount you pay will count toward getting you out of the coverage gap.”

Some people would argue that the member’s cost sharing during the coverage gap of 25% for both generic and brand name drugs is the same as the member’s cost sharing during the initial coverage level, before the coverage gap is reached, so for all intents and purposes, the donut hole is completely closed starting in 2020. While this is a logical argument, the fact is that most Part D plans have copayments for most drugs during the coverage gap while charging a percentage of the cost during the coverage gap, so it is still different from the initial coverage phase. Also, the fact that the manufacturer’s discount for brand name drugs kicks in during the coverage gap and counts toward the member’s out-of-pocket amount also distinguishes the coverage gap from the initial coverage phase.

For more information

We know this can be confusing, especially for agents who don’t specialize in Medicare-related products, but for those of you who do, the cut-off points for the various stages of Part D coverage are important. If you’d like to learn more about how the Medicare Part D coverage gap will work in 2020, we’d recommend that you take a look at the Kaiser Family Foundation article “How Will The Medicare Part D Benefit Change Under Current Law and Leading Proposals?” It has some great information and some graphics that are worth reviewing.