With Doughnut Hole Gone, Medicare's Uncapped Drug Costs Still Bite

ID 60197185 © Julia Sudnitskaya | Dreamstime.com

Although federal legislation closed the doughnut hole for brand-name drugs in 2019, because Medicare has no spending limit for prescription medications in Part D, its drug benefit, some Medicare beneficiaries could owe thousands of dollars in out-of-pocket drug costs every year for a single drug.

The closure is good news, and means that  a beneficiary will only be responsible for 25% of the cost of brand-name drugs. Although the doughnut hole for brand-name drugs has closed, the beneficiary may still see a difference in cost between the initial coverage period and the doughnut hole. For example, if a drug’s total cost is $100 and the beneficiary pays the plan’s $20 copay during the initial coverage period, the beneficiary will be responsible for paying $25 (25% of $100) during the coverage gap. The doughnut hole will close for generic drugs in 2020, at which point a beneficiary will be only responsible for 25% of the cost of generic drugs.

Kaiser Health News published an excellent article, Doughnut Hole Is Gone, But Medicare’s Uncapped Drug Costs Still Bite Into Budgets, about the demise of the doughnut hole and the out-of- pocket costs beneficiaries must still face. The article focuses on the need for an annual cap on out of pocket drug spending by telling the stories of some of those who have significant out-of-pocket costs even with the elimination of the doughnut hole:

 "Legislative changes have gradually closed the doughnut hole so that, this year, beneficiaries no longer face a coverage gap. In a standard Medicare drug plan, beneficiaries pay 25 percent of the price of their brand-name drugs until they reach $5,100 in out-of-pocket costs. Once patients reach that threshold, the catastrophic portion of their coverage kicks in and their obligation drops to 5 percent. But it never disappears."

Recent proposals by the Trump administration and Sen. Ron Wyden (D-Ore.) would address the long-standing problem by imposing a spending cap. The article notes, however, that "it’s unclear whether any of these proposals will gain a foothold."

Although none of the Medicare programs have caps on spending, the article illustrates that those enrolled in original Medicare can purchase Medigap policies, which do not extend to Part D  prescription drug plans.  There's a great chart in the article that compares the existing Part D program with proposed legislation that illustrates the effect of the recent proposal to cap the annual amount. 

"Extra Help" Aids People With Limited Incomes Pay for Medicare Prescription Drug Coverage

Extra Help is a federal program that helps people with limited incomes to pay the costs associated with Medicare prescription drug coverage (Medicare Part D). Extra Help is administered by the Social Security Administration. To qualify, you must meet income and asset guidelines that are determined by the federal government each year. If you are single in 2015, your monthly income must be below $1,471 ($1,991 for couples), and your assets must be up to $13,640 ($27,250 for couples) in order to qualify for Extra Help.

In order to have Extra Help, you must get your prescription drug coverage through Medicare Part D. You can get this coverage through both a stand-alone Part D plan that works with Original Medicare, or through a Medicare Advantage plan that includes prescription drug coverage. Extra Help does not work with other forms of prescription drug coverage, such as coverage from an employer. If you do not have a Part D plan, Extra Help gives you a Special Enrollment Period to enroll in a Part D plan outside of typical enrollment periods.

Depending on your income and assets, you may qualify for either full or partial Extra Help. With either program, you don't pay the full cost of your drugs on your plan’s formulary (the list of covered drugs) that you buy at a pharmacy in your plan’s network. You also can use a mail-order pharmacy with Extra Help. Extra Help can also assist with your monthly Part D premium and annual deductibles.

You can apply online, through the Social Security Administration by calling the National Hotline at 800-772-1213, or by visiting your local Social Security office. 

Extra Help is automatically provided to anyone who has a Medicare Savings Program, receives Supplemental Security Income (SSI), or has Medicaid.  

If you do not qualify for Extra Help, your state may have a State Pharmaceutical Assistance Program (SPAP) that can assist with prescription drug costs. Eligibility requirements and program benefits may vary, depending on the program. Contact your local State Health Insurance Assistance Program (SHIP) to see if there is one available in your state. To find your SHIP, visit www.shiptacenter.org or call 877-839-2675.

Click here or here to read more about Extra Help and to learn about whether you may qualify for Extra Help. Click here to learn about other programs and ways that can help lower your prescription drug costs.