Welcome to Medicare School Daily, where we help you understand Medicare, save money,
avoid mistakes, and above all else, get the most out of your Medicare benefits.
Now, today's topic is the Medicare Part D Donut Hole and how to avoid it.
Now, in order to understand the donut hole, you have to first understand that all Medicare
plans have four different stages.
And what I mean by that is the stage simply represents a different out-of-pocket cost
to you.
And so there are four stages in every drug plan.
So your out-of-pocket costs could conceivably change four different times in the same year.
And then the stage is reset every January.
So a stage represents your out-of-pocket costs.
And again, that could change four times.
Stage number one is called the deductible stage.
Stage number two is called the initial coverage.
Stage number three is called the coverage gap - the donut hole.
Okay?
So the donut hole is stage three and then the last stage is catastrophic.
And so let's work through these stages.
First off, every drug plan that has a deductible this year has a deductible of $435.
And that just simply means that when you pick up your prescriptions, you're paying a copay
and that copay is applied to your deductible.
Now, the truth is probably 80 percent of all people that are on drug plans today will never
reach their deductible.
So they stay in stage one and they do not go beyond that.
But if we do meet our deductible, then we go to stage two.
Now, here in stage two, all you're doing is simply just paying copays for your medications.
Very, very reasonable copays.
And those copays are based upon the tier of the medication.
Most plans have five tiers, tier one, two, three, four and five.
The lower the tier, the lower out-of-pocket.
But whatever the tier cost is, that copay is what you're responsible for in this particular
stage.
OK?
But here's the difference.
While you're in this stage number two, the initial coverage stage, you are just simply
paying your copay but Medicare behind the scenes is actually tracking the retail cost
of your medication.
So if that retail cost is one hundred dollars, Medicare is tracking that.
Now, you're probably paying 10 dollars for it, but they care about the hundred dollars.
And so they're tracking all the medications throughout the year, and then if you ever
reach a certain retail total for the year, which is called the threshold.
This year, that is $4,020.
Now, you didn't pay that.
That was the retail cost of your medications.
So let's say you're an insulin dependent diabetic and the total retail cost of your meds or
maybe a thousand dollars in the month.
That means you're going to take about four months to get there.
I have clients right now that their meds are seven thousand a month.
It's cancer medications; these are chemotherapy pills.
It takes them about three weeks to get there.
Right?
But Medicare is tracking the retail cost.
And if that retail total ever gets to that threshold number, then we're done in stage
two and we go to stage three called the coverage gap or the donut hole.
So people get to the donut hole because they have reached that retail threshold.
So if my meds are a total retail of fifty dollars a month, would you ever get there?
And the answer is no.
One hundred dollars a month?
No.
It takes a substantial amount of retail cost to be able to get there.
But if I do whatever I do, whether that's three weeks or four months or six months or
eight months, but if I ever reach the retail threshold, then I'm going to the donut hole.
And in the donut hole, now I'm going to spend 25% of the retail cost.
So if I'm on meds that cost $1,000 a month, I'm spending out of my pocket $250.
And that's why the donut hole can be painful because many times we see your out-of-pocket
costs go up.
Right?
But people get there because of the retail threshold.
And then we're here in stage three.
And just so you know, only 5% of the Medicare population ever hits the donut hole and only
1% ever come out.
And then if we ever come out of the donut hole, takes a while to do that, we go to catastrophic.
And here we just pay 5% of the retail costs.
So everyone's a happy camper in the catastrophic states.
So it is this stage number three that can be painful.
And that takes us to our final question.
That's this: How can we avoid the donut hole?
Because there are some ways to avoid it.
Number one, use generics if possible.
Now, I know there are not always generic equivalent or alternatives to your medication, but sometimes
there are and sometimes those are just as effective.
Number two, samples, often times doctors are willing and able to bill to give you free
samples and they're free to you.
And because they're free, that amount of money of those meds are not counted towards the
retail cost.
So therefore, you can avoid the donut hole that way if a doctor is able to give you those
samples.
And then, number three, we would encourage you if you're on expensive meds, sometimes
it may be better to pay cash for your meds and get a coupon, maybe through GoodRX or
Blink Health, because when you run those through coupons, you're paying a cash price and again,
that's not going to go toward your total retail costs.
So these are some ways that you can use and implement these things to be able to avoid
the donut hole.
Thanks so much for watching.