Before my husband went on Medicare, I spent many hours researching the rules and the options trying to figure out the best choices for us. The system is extremely complicated and the information needed to understand it tends to be scattered all about the web. Even when it is possible to find the information, understanding it is a whole other issue. It is ridiculous to expect people to be able to negotiate this wilderness of nonsensical regulations. I am a reasonably intelligent person, well educated, with over 20 years experience in the health care field. I can’t figure this crap out without extensive study and some head banging. Still after all my efforts, things come up that surprise me. The big one this week was my misunderstanding of how the donut hole (in Medicare part D, the drug benefit) works.
So, how is the donut hole defined? According to Healthcare.gov the definition is simply this:
Most plans with Medicare prescription drug coverage (Part D) have a coverage gap (called a “donut hole”). This means that after you and your drug plan have spent a certain amount of money for covered drugs, you have to pay all costs out-of-pocket for your prescriptions up to a yearly limit. Once you have spent up to the yearly limit, your coverage gap ends and your drug plan helps pay for covered drugs again.
That doesn’t sound so difficult, does it? For a bit more detail, see this explanation about 2010 costs on the Medicare.gov blog:
- You pay out-of-pocket for monthly Part D premiums all year.
- You pay 100% of your drug costs until you reach the $310 deductible amount.
- After reaching the deductible, you pay 25% of the cost of your drugs, while the Part D plan pays the rest, until the total you and your plan spend on your drugs reaches $2,800.
- Once you reach this limit, you have hit the coverage gap referred to as the “donut hole,” and you are now responsible for the full cost of your drugs until the total you have spent for your drugs reaches the yearly out-of-pocket spending limit of $4,550.
- After this yearly spending limit, you are only responsible for a small amount of the cost, usually 5% of the cost of your drugs.
Hmmm. Ok, still says you spend a certain amount, then you’re in the donut hole, then when you spend some more you are out, right? Perusing Medicare.gov (the official US government Medicare website), the information is much less specific, essentially directing you to the plan database to find plans offered in your area. The key point not mentioned in any of these explanations is that the formula to figure the amount of money spent to get IN the donut hole is different from the formula to figure the amount spent to get OUT of the donut hole.
So why does that matter? Well, it certainly affects your budget planning for the year. Most articles I’ve found on the web on this subject deal mainly with strategies to avoid the donut hole. For example, this article from AARP. I wasn’t all that interested in those as my husband takes some high dollar drugs that we really can’t change at this time. There is no way possible for us to avoid the donut hole. When my husband became eligible for Medicare in November last year, it took one month to get in the donut hole. This was after filling 90 day prescriptions for his two most expensive drugs. I was in utter shock when this happened. The only thing that saved us was the end of the plan year. This year we strategized to fill prescriptions for cheaper drugs before expensive drugs to maximize our time before coverage dropped out. My estimate for coming out of the donut hole was 2 or 3 months, when we again bought the expensive drugs. WRONG!!!
You see the explanations I had read on the Medicare site and on various patient or senior advocacy sites never explicitly explained the calculations of the numbers. Certainly the policy information we received from Humana for my husband’s part C (Medicare Advantage) policy did not.
Here is an example of the type of language generally encountered. Ignore the specific numbers mentioned as this article is several years old.
After $2250 in total drug costs is reached, there is a gap in coverage (the “doughnut hole”) and the enrollee must pay the full cost for their prescription drugs until they have paid $3600 out-of-pocket expense. (It has been erroneously reported that the $3600 out-of-pocket expense is in addition to what has been paid out-of-pocket towards the initial $2250. Actually, what has been paid out-of-pocket during the initial coverage phase also counts towards the $3600.)
After total true out-of-pocket (TrOOP) expense equals $3600, enrollees reach “catastrophic coverage” and their cost per drug drops to a small co-pay (usually $2 or $5) or 5% co-insurance, whichever is greater. During the period enrollees are in the coverage gap or doughnut hole, they must still pay their monthly premium.
These payments count toward a person’s TrOOP costs:
• The amount a person pays for covered prescriptions before his or her drug plan begins
to pay (the annual deductible, if applicable)
• The amount a person pays for each covered prescription after his or her drug plan begins to pay (copayments or coinsurance during initial coverage period)
• Any payments a person makes for a covered prescription drug during his or her plan’s coverage gap, if the plan has a coverage gap
These payments don’t (emphasis added) count toward a person’s TrOOP costs:
• The share of the cost of the drug paid by a Medicare drug plan
• Monthly drug plan premium
• Drugs purchased outside the U.S. and its territories
• Drugs not covered by the plan
• Drugs that are excluded from the definition of Part D drug, even in cases where the plan chooses to cover them as a supplemental benefit (such as drugs for hair growth)
• Over-the-counter drugs or most vitamins (even if they’re required by the plan as part of step therapy)
I was unaware of TrOOP until a couple weeks ago when I was trying to figure out why the little graph on my husband’s most recent medication cost statement only showed us one third of the way through the donut hole when we had just spent a lot of money on expensive medications. By my calculation we should have been closer to two thirds through the hole. This year, the amount spent to go in the donut hole is a total drug cost of $2970. The amount to get out of the donut hole is a total out of pocket cost of $4750. This is where I made my mistake. Note that the first amount includes what you and the insurance company spend combined. The second amount is only what you spend, plus the discount the drug companies give you on your brand name drugs while in the donut hole. TrOOP cost is the key. This means instead of getting out of the donut hole when drug costs hit $4750 total like I thought, the costs mount to more like $6530. This means the amount we have to pay while in the donut hole to get out is not around $900 like I thought. It is closer to $3500. The end result here is we will never get out of the donut hole. That means we have no drug coverage for the remaining 8 months of this year other than the 50% discount the drug companies are required to give us for brand name drugs. When one of your medications costs over $1800 for a 90 day supply, even a 50% discount doesn’t help that much. My husband’s monthly Social Security disability payment is less than $800.
It is devastating to realize how wrong I got this. It felt like a real bait and switch cloaked in bureaucrat-ese. If I can’t figure this out, how on earth does anyone expect an 80 year old grandmother with a high school education to get it? Grandmas can be real sharp cookies and still miss this by a mile. I know many disabled people (like my husband) would not have the skills to work this out on their own.
So, why does it need to be this complicated? It doesn’t. The convoluted figuring and splitting of costs probably makes it cost more to cover people’s medications than it would if the language and formulas were simpler. I am at a loss as to how to change this. Do we have to wait until 2021 when the donut hole closes (supposedly)?