Closing the Prescription Drug Coverage Gap

Most Medicare prescription drug plans (Part D) have a temporary limit on their coverage of prescription drugs. This “coverage gap” or “doughnut hole” is reached after you and your drug plan have spent a certain amount of money for covered drugs. While in the gap you have to pay the full costs of your prescription drugs (up to a limit of $4,550 in out-of-pocket costs in 2011). Every month that you fill a prescription, your drug plan mails you an Explanation of Benefits (EOB) notice, which tells you how much you have spent on covered drugs and if you've reached the coverage gap.

The good news is that the Affordable Care Act, passed by Congress and signed by the President in 2010, includes benefits to help close that gap and make your Medicare prescriptions more affordable. Starting January 1, 2011, if you reach the coverage gap, you will get the following:

• A 50% discount on covered brand-name drugs when you buy them at a pharmacy or order them through the mail.
• Some coverage for generic drugs. You can expect additional savings on your brand-name and generic drugs during the coverage gap over the next 10 years until it's closed in 2020.

Who can get the new savings while in the coverage gap?
You can get the new savings if all of the following are true:

• You're currently enrolled in a Medicare Prescription Drug Plan (including employer group health plans) or a Medicare Advantage Plan that includes prescription drug coverage.
• You have reached the coverage gap.
• You don't get Extra Help (a Medicare program to help people with limited income and resources pay Medicare prescription drug costs).

How does the 50% coverage gap discount work for brand-name drugs?
Companies that make brand-name prescription drugs must sign agreements with Medicare to participate in the Medicare Coverage Gap Discount Program. This program requires the companies to offer discounts on brand-name drugs to people who have reached the coverage gap. Once you've reached the coverage gap, you will automatically get a 50% discount on your brand-name prescription drugs at the time you buy them. This discount applies if you buy your prescriptions at a pharmacy or order them through the mail. The discount will come off of the price that your plan has set with the pharmacy for that specific drug.

With this discount, you will only pay 50% of the price for the brand-name drug, but, the entire price (including the 50% discount the drug company pays) will count toward the amount you need to get out of the gap and qualify for catastrophic coverage. Once you reach catastrophic coverage, you only pay a small coinsurance or copayment for the rest of the year. Your EOB notice will show any discounts paid by the drug companies.

You will still need to pay any dispensing fee (cost to fill a prescription) for your prescription. The dispensing fee isn't discounted. It's added to the discounted amount of your prescription.

Once I've entered the coverage gap, will all Medicare-covered brand-name prescription drugs be discounted?
If a drug company has signed an agreement to participate in the Discount Program, all of the covered Part D brand-name drugs they make are covered during the coverage gap for that calendar year. This includes prescription drugs on the plan's formulary (list of covered drugs) and those covered through an appeal. In 2011, manufacturers that produce over 99% of the brand-name drugs used by people with Medicare are participating in this program.

How is coverage for generic drugs changing in the coverage gap?
In 2011, Medicare will pay 7% of the price for generic drugs during the coverage gap. You will pay the remaining 93% of that price. What you pay for generic drugs during the coverage gap will decrease each year until it reaches 25% in 2020. The coverage for generic drugs works differently than the 50% discount for brand-name drugs. For generic drugs, only the amount you pay will count toward getting you out of the coverage gap. Also, the dispensing fee is included as part of the cost of the drug.

What if I don't get a discount, and I think I should have?
If you think that you have reached the coverage gap and you don't get a discount when you pay for your brand-name prescription, you should review your next Explanation of Benefits (EOB) notice. If the discount doesn't appear on the EOB, you should work with your drug plan to make sure that your prescription records are correct and up-to-date. If your drug plan doesn't agree that you are owed a discount, you can appeal by calling 1-800-MEDICARE (1-800-633-4227).

What if I have other insurance?
You can only get the discount if Medicare Part D is the primary payer (pays first) for your prescription drugs. If your other insurance coverage pays second, they will pay after the discount has been provided.

Will I get additional savings once I reach the coverage gap if I have a Medicare drug plan that already includes coverage in the gap?
Yes. You may get a discount after your plan's coverage has been applied to the price of the drug. The 50% discount for brand-name drugs will apply to the remaining amount that you owe. For example, if you're in a drug plan that offers a 60% discount on brand-name drugs (after you have spent a certain amount) and you fill a $100 brand-name prescription, the cost of your prescription after your plan's savings is $40. The 50% discount would get applied to the $40 amount and you would pay $20 for the prescription. The $40 will count as out-of-pocket spending and help you get out of the coverage gap.

I already get Extra Help from Medicare to help pay my prescription drug costs. Can I get the discounts too?
No. If you get Extra Help, you already get coverage for your prescription drug costs during the coverage gap.

What happens if I fill a prescription and only part of the amount is in the coverage gap?
The 50% discount will only apply to the portion of your claim that's in the coverage gap. For example, if you fill a prescription that costs $100, and only $50 of that cost is in the coverage gap, the discount will only apply to that $50. In this case, you would pay your normal copayment on the $50 portion of the prescription that's not in the coverage gap, plus $25 (50% of the $50 portion that's in the coverage gap).

How will I know if my prescription will be covered at a discount and what should I do if it isn't?
Contact your drug plan or ask your pharmacist if the prescription drugs you take are covered at a discount during the coverage gap. Your brand-name drug will be covered under Part D and discounted if it's made by a drug company that's participating in the Medicare Coverage Gap Discount Program and you reach the coverage gap. If your brand-name drug is made by a drug company that has chosen not to participate in the Discount Program, the drug won't be covered under Medicare Part D. If your drug isn't covered, talk to your doctor or other health care provider to find out if there's another drug that you can take. 

If you have limited income and resources , you should also apply for the Extra Help/Low Income Subsidy (LIS) benefit through Social Security. If you are awarded the subsidy, you will get help paying for the plan’s monthly premium, annual deductible, and prescription co-payments.