Medicare Part D Coverage Gap 2022 – Medicare’s prescription drug plans all include a coverage gap or “donut hole,” during which the insured must pay more for their medications. Not everyone will enter the coverage gap, but if you are someone who takes expensive prescriptions, it might happen to you. It’s a good idea to understand what the coverage gap is and when you might fall into it so that you can adjust your budget accordingly.
What is the Medicare coverage gap?
The coverage gap occurs during the third stage of your Part D coverage. Whether you have your Part D plan bundled into your Medicare Advantage plan or you have it as a stand-alone policy, there are always four phases of coverage.
- Deductible Phase
- Initial Coverage Phase
- The Coverage Gap
- Catastrophic Coverage
The first few stages are pretty self-explanatory. During the deductible phase, you’ll need to pay your deductible before the plan starts paying its portion of the c0st-sharing. (Your plan will likely have some prescriptions that are exempt from the deductible.) Once the deductible has been met, you enter phase two, the initial coverage phase. During this time, you’ll only pay the normal coinsurance or copayment for each prescription refill.
The initial coverage phase has a limit that changes each year. This year (2022), the coverage limit is $4,430. Your coinsurance costs and any amounts paid by the insurance company are included in that number. Once the total hits $4,430, you enter the Part D donut hole.
How does the Part D coverage gap work?
The donut hole has changed over the years. Some people will even tell you that it doesn’t exist anymore. That’s certainly not true, but it has become more affordable than it was. Prior to 2020, Medicare beneficiaries had to pay upwards of 37% of their prescription costs. Now, when you’re in the coverage gap, you will pay up to 25% of the cost of your medications. Better, yes. But gone? Definitely not!
The coverage gap ends when you have spent $7,050 out of your own pocket. Unlike the initial coverage limit, this number does not include any amounts that your plan paid. The full $7,050 is made up of your contributions as well as any discounts you’ve received on brand-name drugs. For instance, if you were able to get a manufacturer discount of 50% on a medication, that 50% is still included in your out-of-pocket costs. If you purchased any medications that were not part of the plan’s drug formulary, those costs are not included in the amount.
After you meet the threshold of $7,050, you enter the last coverage phase: catastrophic coverage. Your costs drop significantly during this phase and will only be about 5% of the cost. The maximum you pay for generics is $3.95, and the maximum for name-brand drugs is $9.85.
How to Minimize Your Prescription Drug Costs
For some, there is simply no way to avoid the donut hole. However, if you can postpone it for as long as possible, you can save more money on your medications. There are a few techniques you may be able to use to reduce your prescription drug costs.
Understand your plan. Make sure you’re getting the most of your benefits! Each plan has pharmacies that are “preferred.” Using a preferred pharmacy will give you the lowest rates versus a pharmacy that is either “standard” or “out-of-network.” In addition, find out if it’s cheaper to get your medications in 90-day supplies or even by mail-order. There are often additional discounts if you use these methods.
Switch to generic drugs. If you’re currently taking a name-brand medication, ask your doctor if it’s possible to switch to a generic form. Generic drugs are required by the FDA to have the same components as their name-brand counterparts and are often an acceptable substitution.
Search for discounts. Ask your doctor if they know of any manufacturer discounts available for medications you take. You can also search online for coupons or call the company directly. This is also a great cost-saving option for when you are in the donut hole.
Review your plan every fall. The Annual Enrollment Period (AEP) occurs every fall. It’s imperative that you get your drug plan reviewed as the plans often change. What works great now may not work next year. And even if your plan isn’t expecting any changes, new plans are released each year and may offer better coverage than what you currently have.
Use savings programs. GoodRx is a popular choice for saving money on your prescription drugs. There are other programs available, such as Mark Cuban’s new Cost Plus Drugs. These take some time and research but can pay off with excellent savings. (Be wary of membership fees that some require.)
Apply for Extra Help. Medicare’s Extra Help program is available to individuals with lower incomes. You must apply for this financial assistance, but if accepted, it can help pay for plan premiums and c0st-sharing amounts. Plus, if you get Extra Help, you’re not subject to any late-enrollment penalties, and you get to skip the donut hole altogether.
Medicare’s coverage gap is a little confusing and can be difficult to navigate. If you find yourself in the donut hole year after year, be sure to speak with one of our Medicare advisors. We’ll make sure you’re doing all you can to avoid the higher prescription drug costs.