What is the Donut Hole I Hear Everyone Talking About with Medicare?

Medicare Part D provides enrollees with prescription drug coverage. This coverage is offered to all Medicare beneficiaries who are eligible for Original Medicare. It is provided via private insurance companies, as well as through other insurance carriers that have been approved by Medicare.

There are many different Medicare Part D prescription drug plans to choose from, all offering different types of prescription benefit options. Therefore, these plans also have differing premium costs as well.

If you are an enrollee in Medicare Parts A and B (Original Medicare) and you do not join a Medicare Part D plan when initially eligible (unless you have other creditable coverage), you will likely be required to pay a late enrollment penalty when you do apply for Part D in the future.

What Exactly is the Medicare Part D Donut Hole?

As with the other parts of Medicare, Part D also has several areas where coverage lacks. Therefore, the Medicare Part D donut hole is actually the coverage “gap” that exists in some of the Part D prescription drug plans.

This means that after the enrollee and his or her prescription drug plan has spent a certain amount on covered drugs, they will need to then pay the full amount of their prescription drugs up to a certain dollar limit.

Once the enrollee reaches the donut hole, they will again start to receive a discount on covered name brand name prescription drugs – regardless of whether they are purchased through a brick and mortar pharmacy or via a mail order option. In addition, the individual could also obtain some coverage for generic prescription drugs.

In order to know whether or not a prescription will be covered at a discount, the pharmacy that is dispensing the drugs will be able to offer the participant the information. For instance, should a brand name prescription be produced by a drug company that has opted not to participate in the discount program, then that drug won’t be covered under the Medicare Part D prescription drug plan.

In 2014, the donut hole in a participant’s coverage will begin when the total for their prescription drug costs reaches $2,970. It is important to understand that this amount is the total retail cost of the covered prescription drugs, and not the amount that the enrollee has personally spent on his or her medications.

A portion of the $2,970 amount will typically be paid by the enrollee out-of-pocket, while the other portion will be paid by Medicare. With this in mind, the total cost of the person’s drugs will be determined via their Medicare Part D plan’s negotiated retail drug price.

It is possible, because of the fact that the negotiated prices of such drugs may vary, that some Medicare Part D prescription drug plan participants may be able to reach their donut hole faster than other participants.

Taking the Next Step – How and When to Enroll in Medicare Part D

To be eligible for Medicare Part D, you must first be eligible for Medicare coverage. This means that you must be age 65 or older and be a U.S. citizen or permanent resident, or be under age 65 and have a certain qualifying disability such as End Stage Renal Disease.

In order for an individual to enroll in a Medicare Part D prescription drug plan, they should contact Medicare directly. The premium that is charged may vary, based upon the options that the enrollee has chosen in their Part D plan. Once enrolled, an individual must typically remain in a Part D plan for the remainder of the calendar year in which they have applied.

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