Medicare Prescription Drug Coverage: Part III

Illustration by Christoph Niemann

In any one year, the Part D drug benefit gives you initial coverage up to a certain level. But then in most cases there’s a gap in coverage when you pay 100 percent of your costs before coverage kicks in again. It works like this:  Once your total drug costs (what your plan has paid plus your deductible and copays) exceed a certain amount ($2,700 in 2009; $2,830 in 2010), Medicare will cover no more in the year until you’ve spent a certain amount out of your own pocket ($4,350 in 2009; $4,550 in 2010). If you reach this limit, catastrophic drug coverage kicks in automatically and your plan will pay 95 percent of your remaining costs until the end of the year. 

Will everyone fall into the drug coverage gap?

No. You’ll avoid it if:

* Your drugs over the year cost no more than ($2,700 in 2009; $2,830 in 2010).

* You qualify for Extra Help, which has no gap.

* You have extra coverage from employer or union benefits that covers all or part of the gap.

* You have extra coverage from a state pharmacy assistance program that provides coverage in the gap.

* You are enrolled in a Medicare drug plan that covers your drugs (usually generics only) during the gap, often for a higher premium.

Related Question:
• Should I consider a drug plan with coverage in the doughnut hole?

How do I get drugs during the drug coverage gap?

You can continue to get them through your plan at the discounts it has negotiated. Your plan will track your expenses so they count toward the out-of-pocket limit. In the gap, you may find drugs elsewhere that are less expensive than your plan charges. You can buy these if you wish—but, under Medicare rules, only drugs purchased at pharmacies within your plan’s network count toward the limit.

What counts toward my out-of-pocket spending limit?

* Your deductible

* Your copays during the initial coverage period

* What you spend on drugs out of pocket during the gap

* Any payments for your drugs made by a family member or friend, a charitable group or a state pharmacy assistance program

In all cases, only payments for drugs your plan covers on its formulary (including any “exceptions” you receive) and are purchased from a pharmacy in your plan’s network count toward the limit.

What does not count toward my limit?

* Your premiums

* Payments for drugs not covered by your plan

* Payments for drugs bought at a pharmacy outside your plan’s network

* Payments made by your plan, by an employer, union, federal agency or other group insurer

* The value of free or low-cost drugs provided by a drug manufacturer’s assistance program

* The value of drug samples provided by a doctor free of charge

* Any drugs bought from Canada or other foreign countries

Can I delay reaching the gap?

Yes. Using lower-cost drugs will make your initial coverage last longer. Ask your doctor if generics or less-expensive brand-name drugs would work just as well as the ones you now take. Choosing these drugs could also reduce your copays. (For information on how similar drugs compare in effectiveness, go to the Consumer Union’s site.)

What if I can’t afford the cost of my drugs in the gap?

First ask your doctor if any other drugs on your plan’s formulary would be just as effective for your medical condition. Using lower-cost medications, such as generics or similar but older brand-name drugs, will substantially reduce your costs at any time, not just in the gap.

If you don’t have additional insurance (for example, from an employer plan, a state pharmacy assistance program or Extra Help) that pays some or all of your costs in the gap, you may consider other (non-insurance) sources of help. These include:

* Free or low cost drugs from assistance programs run by pharmaceutical manufacturers.

* Free or low-cost drugs supplied by local medical clinics, charities or patients’ organizations.

* Lower-cost drugs from Canada or other countries.

Must I continue to pay my monthly premiums during the gap?

If you stop paying premiums, your plan will likely terminate your contract, leaving you without drug coverage. In that case, if you join a Part D plan again in the future, you’d have to pay a late penalty according to the number of months you were without coverage.

Related question:
• What is the late penalty?

How will I know where I am in relation to the gap?

The monthly statement you receive from your plan must explain how near you are to entering the coverage gap or, if you’re already in it, how much more you need to spend on your drugs this year before qualifying for catastrophic coverage.

If you use the Prescription Drug Plan Finder tool to choose a drug plan—by entering the names of the meds you take, plus their dosages and how often you take them—you can see a bar chart that indicates your total out-of-pocket expenses month by month over the whole year for each plan. The chart shows if and when you’ll fall into the doughnut hole and, if so, how long you’ll stay in it.

• Part I – How Medicare Part D Coverage Works
• Part II – Extra Help Paying for Drugs
• Part IV – Deciding Whether You Need Part D
• Part V – Choosing a Part D Drug Plan
• Part VI – Enrolling in Medicare Part D
• Part VII – Glossary of Terms
• Part VIII – Resources Guide

Patricia Barry is a senior editor at the AARP Bulletin.