Calls regarding what to do while in the Part D donut hole continue to pour in on California Health Advocates’ helpline, comprising 25-30% of all calls this fall. These numbers reflect the national average, being 1 in 4 or 26% of beneficiaries who fill prescriptions fall into this hole during the year. (See Kaiser Family Foundation report and our recent article on the Part D donut hole.) For 2008, people who reach their initial coverage maximum of $2,510 are responsible for paying the next $3,216 out-of-pocket before they qualify for ‘catastrophic coverage.’ (note: The Initial Coverage Maximum this includes the beneficiaries’ $275 deductible and the $2,235 of the initial coverage period where the beneficiary pays 25% of the cost — or $559 — and the Part D plan pays 75% — or $1,676.)
Once they qualify for catastrophic coverage, beneficiaries are only responsible for 5% of their drug costs. Yet, getting to this point means spending a total of $4,050 in 2008. In 2009, beneficiaries need to spend $300 more, or $4,350 out of pocket, before reaching catastrophic coverage. While in the donut hole, beneficiaries must spend $3,454 out of pocket, or $238 more than in 2008. See chart below.
Not all out-of-pocket expenses count to determine if a beneficiary has reached catastrophic coverage. Knowing what out-of-pocket costs count and what does not count is important. These out-of-pocket costs are often referred to as TrOOP, which stands for true out-of-pocket costs. Below is a review of what does and does not count towards a beneficiary’s TrOOP costs, a review of CMS’ “cash price policy,” and a list of resources regarding TrOOP costs and help when in the Part D donut hole.
Payments that count towards TrOOP
The Centers for Medicare and Medicaid Services’ (CMS)tip sheet, Understanding True Out-of-Pocket (TrOOP) Costs outlines this information.
Health Assistance Partnership has an easy-to-read chart with this information as well.
To summarize, payments only count towards beneficiaries’ TrOOP costs if they are made for drugs:
- on the plan’s formulary; and
- purchased at a network pharmacy (a pharmacy contracting with the Part D plan).
There are exceptions to the above rules.
- Payment for a drug not in the plan’s formulary may count towards TrOOP if the plan decides to cover the drug as a result of a coverage determination, exceptions process or an appeal.
- Payment for a drug purchased at an out-of-network pharmacy may count towards TrOOP if it was made in accordance to the plan’s out-of-network policy, such as an emergency. Every plan is required to have such a policy. See section Chapter 5, section 60 of the Part D Manual.
Costs that count include:
- Payments toward the annual deductible, co-payments and/or co-insurance. These payments count regardless of whether a beneficiary makes the payment, or if his/her friends or relatives pay on his/her behalf.
- Beneficiary spending from Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs) and Medicare Medical Savings Accounts (MSAs).
- Unadvertised waivers of co-payments or costs made by pharmacies on an individual basis based on a beneficiary’s inability to pay.
- Payments by Qualified State Pharmaceutical Assistance Programs (SPAPs) – California does not currently offer a qualified SPAP. See CMS’ website for a list of qualified SPAPs in other states.
- Co-payments beneficiaries pay when using a patient assistance program (PAP) for their Part D covered drug(s).
Payments that don’t count towards TrOOP
Payments that don’t count include:
- Monthly premiums;
- Drugs purchased outside the U.S. and its territories;
- Drugs not on a beneficiary’s Part D plan’s formulary, or drugs purchased at out-of-network pharmacies (exceptions mentioned above);
- Amount paid by other insurance plans in addition to a beneficiary’s Part D plan (such as employer, union, or retiree health coverage);
- The total cost of a drug that a patient assistance program (PAP) provides for a beneficiary (only the beneficiary co-payment counts, as mentioned above);
- Co-payments beneficiaries pay to PAPs for Part D covered drugs that are not on their plan’s formulary.
- Amount paid by state programs that receive federal funds, such as AIDS Drug Assistance Program.
Drug plans are responsible for calculating and keeping track of a person’s TrOOP, and must send each enrollee a statement summarizing how much the plan and the beneficiary have paid at the end of every month. Pharmacies can also tell beneficiaries how close they are to reaching the plan’s deductible (if applicable) or the donut hole.
Little-known “lower cash price policy”
CMS also has a little-known “lower cash price policy” that outlines when beneficiaries must submit receipts to receive TrOOP credit for covered drugs purchased at network pharmacies. The “lower cash price policy” allows beneficiaries to receive credit toward their total out-of-pocket spending when they buy “one-time” or periodically discounted drugs offered by network pharmacies that are available to all customers. It refers only to network pharmacies, and applies only when someone is in their deductible phase or in the donut hole. In these cases, beneficiaries can purchase their drugs at the special rate without showing their Part D card and then submit their receipt to their Part D plan to be applied to their TrOOP. This policy is found in section 50.4.2 of chapter 14 of the Part D Manual.
Resources
Chart outlining Part D coverage and beneficiary cost-sharing for 2009:
| Coverage | Part D Plan Pays | Beneficiary Pays |
|---|---|---|
| Annual Deductible ($295) | $0 | $295 |
| Initial Coverage Period ($2,405) | 75% of $2,405 ($1,804) | 25% of $2,405 ($601) |
| No Coverage (“Donut Hole”) ($3,454) Once your total drug costs equal $2,700 ($295 + $2,405), you are in the ‘donut hole.’ You must cover $3,454 in drug costs before catastrophic coverage begins. |
$0 | 100% ($3,454) |
| Catastrophic Coverage This begins once you’ve reached your ‘out-of-pocket threshold’ of $4,350 in 2009. ($295 deductible + $601 initial coverage + $3,454 ‘donut hole’) |
95% of remaining costs | Greater of 5% of remaining costs or $2.40 for generic drug or $6.00 for brand name drug. |
- List of resources and cost-saving strategies one can use while in the donut hole.
- Fact sheet providing an overview of Medicare Part D.
- CMS’ TrOOP tip sheet.
- HAP’s TrOOP chart.
