Medicare prescription drug plans can help beneficiaries reduce their out-of-pocket expenses for prescription drugs, but there’s a catch: the coverage gap. If you’re enrolled in Medicare, you know that your prescription drug coverage essentially stops when you and your insurance plan have spent a combined total of $2,830 on prescription medications.
Beyond that point, the beneficiary covers the full cost of prescription medications until drug expenditures in a calendar year reach $4,550. If your drug costs exceed this amount, catastrophic coverage kicks in and you’ll pay either $2.50 for generic drugs ($6.30 for brand name drugs) or 5% of the drug’s cost, whichever is greater.
The new healthcare legislation aims to correct this by 2020, and is also the impetus for the $250 “gap” check that some beneficiaries who have exceeded the $2,830 spending limit will receive. Some relief provisions of the new law go into effect in 2011, and allow beneficiaries who have crossed the $2,830 threshold to purchase generic drugs at a 7% discount and brand name drugs at a 50% discount.
In subsequent years, the amount of the drug discount will increase until 2020, when all drugs will be available at a 75% discount for beneficiaries “in the gap.”
The issue isn’t a small one; about 3 million Americans each year fall into the prescription drug coverage gap, also known as the “doughnut hole.” The doughnut hole isn’t a given; some insurance options can help you avoid the coverage gap.
The American Association of Retired Persons (AARP) provides a “Doughnut Hole Calculator” in both English and Spanish, to help beneficiaries determine when or if their present coverage will allow them to fall into the gap based on their current prescription drug needs.
Avalere Health, a healthcare policy research firm, says that Medicare beneficiaries must do some research before making their Medicare Part D plan election for 2011. The company says that significant changes await some enrollees, even if they elect the same Part D provider they had in 2010. According to the company, many Medicare Part D providers have changed their formularies and co-pay costs, meaning that some drugs that were covered in 2010 may not be covered in 2011.
One of the more noticeable changes may be in the way providers structure co-pays. According to Avalere Health, more providers are structuring their Part D plans with five or more tiers, which will allow providers to charge different co-pays for drugs in different plan tiers. The number of tiered plans has risen from 27% in 2009 to more than 40% in 2011. Some plans that already use tiered payment structures have two different tiers for generic drugs.
Another major change for consumers will be in their choice of pharmacy. Some Part D plans will use preferred pharmacies and will base consumer out-of-pocket costs not only on the prescribed drugs, but also on whether or not prescriptions are filled at a participating pharmacy. Consumers who use non-plan pharmacies may find themselves paying up to 50% more in out-of-pocket costs for prescription drugs.
More Part D plans are also using pre-authorization and limiting the quantity of medications that can be dispensed at one time, creating an overall higher cost to the consumer for pharmaceuticals in the form of additional co-pays. The end result of these changes is a net decrease in the number of drugs covered by the top ten prescription drug plans (PDP) for 2011.
Among the top ten plans, the 2011 formularies cover between 50% and 87% of prescription drugs. To illustrate the potential impact of changes among drug plans, Avalere’s analysis shows that while the AARP’s 2011 formulary covers four popular rheumatoid arthritis drugs with a 33% cost-share, Humana-WalMart’s 2011 formulary covers only two of the four drugs and has a 35% cost-share on the covered formulations. In addition, the cost-share at non-preferred pharmacies is significantly higher. Enrollees must pay out-of-pocket for drugs not covered by their provider’s formulary. More information about the Avalere Health study can be found at AvalereHealth.net.
- December 15, 2010
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