The Medicare coverage gap can have a significant impact on your medication costs, resulting in added expense and inconvenience. The gap requires you to reach a certain limit of spending before you can leave it.
It affects many Americans every year. If your coverage plan has a gap in it, it is important to learn how you can manage your insurance to lower your medical expenses and close the coverage gap as soon as possible.
There are several ways you can take advantage of savings and discounts while in the coverage gap, allowing you to reduce the amount you must pay out-of-pocket for medical costs. Making sure you meet the requirements to move into the next stage of your Medicare plan, and away from the coverage gap, is also important.
Understanding what the gap is, and what it means, can help you plan your insurance and health care in the best possible way. More information about how the coverage gap affects you is covered below.
What is the Coverage Gap?
The coverage gap is also informally known as the “donut hole” and affects many Medicare part D plans. Not everyone is affected, but there is a chance your Medicare plan has limited stages for your medication payments. These are as follows:
- Your deductible is the amount you must spend on your medication before your insurance plan is able to contribute.
- Your copayment or coinsurance means you share the costs for your medication with your insurer.
- The coverage gap occurs once you have reached the limit of your copayment and are responsible for covering your medication expenses once more. Some expenses may be alleviated while you are in the gap, and you can also receive discounts on your medication under certain circumstances.
- The catastrophic coverage stage occurs when you have reached the limit on the coverage gap. You only have a low coinsurance or copayment to cover when in this stage.
Learn About Discounts
You can find your eligibility for medication discounts on your Explanation of Benefits notice (EoB). The EoB is mailed to you on a monthly basis every time you fill your prescription.
This notice is also how you determine whether you have reached the coverage gap. The EoB also contains a record of any discounts you received on your drug purchases. If your plan does not allow for a discount, you can request an alteration to reflect your prescription drug needs.
If you request a discount and are denied, you can appeal your insurer’s decision through your State Health Insurance Assistance Program, or directly through Medicare.
In the past, customers were required to pay their own medication costs out-of-pocket while in the coverage gap. However, steps were taken to assist customers by providing discounts on medication until they reach the catastrophic coverage limit.
This includes both brand name and generic medication. These steps apply if you order medication through the mail or buy your medication at a pharmacy.
About Types of Medication
Your available discounts depend on the type of medication you purchase. The type of medication also affects the contributions you can make toward your catastrophic coverage threshold. The differences are as follows:
- Brand name drugs carry a higher discount percentage than generic drugs. In 2024, you are expected to pay no more than 25 percent of the cost. The amount you pay adds to the out-of-pocket limit for your coverage gap.
- Generic drugs are discounted to 25 percent of the cost during the coverage gap in 2024 while Medicare covers 75 percent of the cost. However, only the cost of the drug itself contributes toward meeting your catastrophic coverage limit. This means you can spend less overall on your medication, but it may take longer for you to leave the coverage gap.
Find Out About Qualifications for Savings
The savings available on various medications while you are in the coverage gap only apply once you have reached the gap. You cannot receive the savings or discounts while in the copayment or catastrophic stage of your plan. You may not receive the savings for the coverage gap if you receive assistance from the Extra Help program for your Medicare payments.
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The savings are reserved for Medicare beneficiaries who are already enrolled in Medicare plans. This can be a Medicare prescription drug plan or a Medicare Advantage plan. The Medicare Advantage plan must include prescription drug costs in order to qualify.
How to Qualify to Leave the Gap
Although you may spend more when in the coverage gap than you did while benefiting from copayments, the amount you spend counts toward your out-of-pocket limit. This can help you leave the coverage gap and enter the catastrophic coverage phase. In this phase, your insurer pays a higher amount toward your medication. There are certain expenses that do not count toward meeting the limit to qualify for catastrophic coverage. These include the following:
- The amount you pay for drugs not covered in your insurance plan. This includes drugs you are prescribed through an exception to the plan.
- The monthly premium you pay toward your coverage.
- The pharmacy dispensing fee, included in the drug costs.
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The out-of-pocket costs that count toward moving into catastrophic coverage are as follows:
- The amount you pay for your yearly deductible.
- The payments you made as part of coinsurance or copayments.
- Any discount you received on brand-name drugs while in the coverage gap.
- The full amount you pay out-of-pocket for brand name or generic drugs while in the coverage gap.
How to Close the Gap
The discounts you receive change every year, with a higher percentage being covered by your policy in each successive year. The limit you are considered to have entered and exited the coverage gap also changes. This gives you more time in the copayment stage, allowing you to move into the catastrophic phase quicker These policies have been put in place to effectively close the coverage gap within several years.
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