A Health Insurance Disaster: Falling Down the Medicare Donut Hole

Today, we’re continuing the TSD writers series with health insurance insider, Jennifer McCarthy’s costly health insurance disaster. Be sure to read Jennifer’s guide to health insurance and her articles on student health insurance, health savings accounts and health insurance loopholes.

Feel free to share your experiences in the comments, or reach out to the writers via their contact info.

-Trent
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Medicare kicked in for me in February of 2012. Among the exhaustive research I did at that time was to choose a provider for Part D, my prescription drug coverage. Because I have more than one chronic illness, I have a long list of medications; my primary goal in choosing a Part D provider was to find the most exhaustive formulary I could afford.

I understood at the time that the provisions of all Part D plans allowed for a coverage gap, commonly referred to as ‘the donut hole’ for reasons that remain unclear to me. The donut hole isn’t a tasty little tidbit of something sugary and sprinkled – it’s when your prescription coverage drops precipitously once your Part D provider reaches a certain threshold of spending.

The donut hole isn’t a tasty little tidbit of something sugary and sprinkled – it’s when your prescription coverage drops precipitously once your Part D provider reaches a certain threshold of spending.

I understood, back in February, that a day might come when my meds suddenly got more expensive. Chronic illness, however, can be time-consuming, as can wrangling three teenagers who are determined to drive me to the nuthouse. I conveniently forgot about donuts and their holes and carried on about my business.

In December, in the midst of portioning out my fixed income for a pile of small, expensive electronics, designer makeup and clothing my daughters claimed were utter necessities, I dropped by the pharmacy to pick up my monthly ration of pain medication. During a month when I typically forego things like eating in order to buy holiday gifts – a $36 prescription was suddenly ringing up at $454.00. The timing was ugly.

I am a chronic pain patient, and am what’s known as opiod-tolerant. This means that standard pain meds don’t work for me – I require specialty drugs that are not cheap. This also means that my pain level without these drugs leaves me unable to function. Writhing uselessly on the sofa for the duration of the holidays was not an option. I forked over $454.00.

Furiously logging into my insurance account did not, in fact, reveal a way for me to submit a claim for reimbursement. It revealed the fine print that I’d conveniently ignored. All of my prescriptions for the rest of December cost me hundreds more than I normally paid, because I’d reached the coverage gap in my insurance. Had I paid attention to the details, I’d have planned for this expense. Instead, I was sideswiped by massive added expenses at the worst possible time of the year. Ultimately, this mistake cost me $1,362.

The nitty-gritty details: in my case, coinsurance for prescription cost $5 per month for approved generics, $36 for approved brand name drugs and a max of $68 for “select approved drugs,” all of which were clearly listed in the plan formulary. When I reached the plan’s expense ceiling (which looked nothing like a donut) things changed drastically.

Medicare Part D is arranged into three tiers that reset each calendar year.

  • Tier 1 is the first part of your coverage, where the plan pays the bulk of your cost and you pay coinsurance. This lasts until your reach a predetermined coverage limit. In my case, the limit was $2,930.
  • Tier 2 is the coverage gap. Under current law, this means that your provider can drastically reduce your coverage after you’ve reached their spending ceiling. Depending on the details of your plan, you remain in Tier 2 until a prescribed amount is spent. For me, Tier 2 means that I am responsible for 50% of the cost of all brand name and approved drugs. This ends when the plan and I each spend about $4,000.
  • Tier 3 offers very good coverage, which is a relief because thousands of your out-of-pocket dollars must be spent before you can get there. My plan pays almost the entire cost of any medications once I reach Tier 3.

There is good news. Part D tiers reset in January of every year; I can count myself lucky that I didn’t fall into Tier 2 until December. And in even bigger news, the Affordable Care Act is taking aim at the donut hole. Gaps in coverage that leave consumers responsible for the bulk of their prescription costs are being closed a little bit each year; Obamacare plans to completely remove Part D coverage gaps by 2020.

for any Medicare Part D users, or anyone with an insurance plan that places limitations on prescription coverage: know your plan

The moral of the story for any Medicare Part D users, or anyone with an insurance plan that places limitations on prescription coverage: know your plan, particularly if you have ongoing medication needs. Researching Medicare options is mind-boggling, and the temptation to walk away from it all once you’ve selected your options may be strong. To avoid a nasty surprise, you need to educate yourself about the details of your coverage.

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