Starting January 1, 2013, beneficiaries who reach the Part D coverage gap, or donut hole, will continue to see their costs decrease. Next year beneficiaries will pay 47.5% of the cost of their covered brand name drugs, down slightly from the 50% they pay this year, and 79% of their covered generic drugs instead of 86% this year. For brand name drugs, the other 52.5% is covered by a 50% discount from drug manufacturers and a 2.5% subsidy. For generics, the remaining 21% is covered by a subsidy.
This change is due to the health reform law passed in March 2010. Previously, the coverage gap, or so called “donut hole,” meant beneficiaries had to pay 100% of their drug costs. The discount and subsidy is gradually increasing over the next several years until the donut hole is eliminated in 2020. Then, beneficiaries will pay just 25% of their drug costs until they reach the last phase, catastrophic coverage. See a chart of the increased discounts over the next 7 years at Healthcare.gov.
Reviewing how the donut hole discount/subsidy works
Beneficiaries will continue to receive the discount or subsidy immediately when paying for their drugs at the pharmacy. They do not need to fill out any forms. The 50% manufacturer’s discount and the 2.5% subsidy applies to all “applicable” Part D covered brand-name drugs on a Part D plan’s formulary and drugs granted an exception by the plan. Beneficiaries will pay 47.5% of the brand name drug’s cost, plus a small dispensing fee (usually $2 – $5) charged by the pharmacy. For generics, the 21% subsidy applies to all generic and other non-brand name Part D covered drugs on a plan’s formulary, drugs granted an exception, and the dispensing fee. Thus a beneficiary only pays 79% of the cost of generic drugs plus the dispensing fee.
“Applicable drugs” refer to brand name drugs provided by manufacturers who have signed an agreement with the Centers for Medicare and Medicaid Services (CMS) to participate in the discount program. Drugs sold by manufacturers who do not sign an agreement will not be covered under Part D; an exception cannot be requested for such drugs.
What costs count toward TrOOP — True Out-Of-Pocket Costs?
For brand name drugs, the total cost of the drug minus the 2.5% subsidy will be counted toward one’s TrOOP, not just the 47.5% the beneficiary pays. For generics, however, only the amount the beneficiary pays, will count toward their TrOOP. Once a beneficiary’s true out-of-pocket costs reach $4,750, they will be out of the “donut hole” and have catastrophic coverage with much lower copayments.
Are There Exceptions?
Yes, there are exceptions.
- The discounts during the donut hole do not apply to people with the Extra Help and/or people in a retiree drug subsidy program.
- The discount is only available if Medicare Part D is the primary payer. If there is secondary insurance, it will pay after the Part D discount has been applied.
In addition, if a beneficiary fills a prescription that crosses Part D stages of coverage, also referred to as a “straddle claim,” the discount will only apply to the portion of the prescription that falls under the donut hole.
2013 Part D plan changes and updates
In 2013, California will have 32 Part D prescription drug plans (PDPs) available. Premiums of 2013 PDP range from $15.00 to $118.60. Twenty-six of the plans are renewing plans and 6 are new plans.
Six of the plans will be benchmark plans, which have premiums below the benchmark amount of $29.88. Beneficiaries eligible for Extra Help who enroll in benchmark plans do not have to pay the premium or deductible. Of these 6 benchmark plans, 4 are continuing benchmark plans from 2012 and 2 are new. One of the renewing plans, SilverScript Basic is a consolidation of 3 Part D plans from 2012: CVS Caremark Value, Health Net Orange Option 1 and Community CCRx Basic. CVS Caremark Value and Health Net Orange Option 1 are both benchmark plans in 2012. Members currently in these plans will be “crosswalked” into SilverScript Basic for 2013. Since these plans are consolidating, not terminating, members in the 3 plans will have neither a Special Election Period to change plans, nor a guaranteed issue right to a Medigap plan. They can, however, change plans during the Annual Election Period (between Oct 15 – Dec 7).
2013 Part D standard plan costs
The chart below describes the required basic coverage under Part D. Part D plans must offer coverage that is at least as good as this standard plan. Most of the costs for 2013 are slightly higher than they were for 2012. This means it will take beneficiaries a bit longer to reach the donut hole.
|Coverage||Part D Plan Pays||Beneficiary Pays|
|Annual Deductible ($325)||0||$325|
|Initial coverage Period (>$325-2970)||75% of $2645 ($1983.75)||25% of $2,645 ($661.250)|
|Coverage Gap (“Donut Hole”)
Once your total drug costs (what you and your plan pay) exceed $2,970 ($325 + $2,645), you are in the ‘donut hole.’
|$0 (For brand name drugs, the 50% discount comes from drug manufacturers + 2.5% subsidy, and the 21% subsidy for generic drugs comes from Medicare)||47.5% of covered brand name drugs plus dispensing fee; 79% of covered generic drugs|
This begins once you’ve reached your ‘out-of-pocket threshold’ of $4,750 in 2013. ($325 deductible + $661.25 initial coverage + $3,763.75 ‘donut hole’)
|95% or the drug cost minus the copay||Greater of 5% of the drug costs or $2.65 for a generic drug or $6.60 for a brand name drug|
Additional coverage for barbiturates and benzodiazepines
As of 2013, Medicare prescription drug plans (MA-PDs and PDPs) will also cover benzodiazepines (including Xanax, Valium and other drugs often used for anxiety and insomnia) and barbiturates, when prescribed for treating epilepsy, cancer or mental disorder. Coverage conditions that apply to other Part D drugs (such as prior authorization, step therapy and/or quantity limits) also apply to benzodiazepines and barbiturates.
Beneficiaries who have both Medicare and Medi-Cal may start to have copayments and other restrictions, such as those mentioned above, for these drugs in 2013. Currently, some of these drugs are covered under their Medi-Cal with no copayments.
Update on Part D appeals ~ prescribers can now request a reconsideration for enrollees
Earlier this year, the Centers for Medicare and Medicaid Services (CMS) amended its regulations to allow prescribers to request a reconsideration on a beneficiary’s behalf without completing an appointment of representative form. CMS hopes this change will make the Part D appeals process more accessible to beneficiaries.
Requesting a reconsideration is the second level of the Part D appeals process. Beneficiaries who request a coverage determination from their plan, and receive a determination not in their favor, may request a “redetermination” from their Part D or Medicare Advantage prescription drug (MA-PD) plan. This is the first level of the appeals process. If the redetermination is still not in the beneficiary’s favor, they can go on to the second level and request a reconsideration. This “reconsideration” is examined by an Independent Review Entity (IRE). A prescriber can now step in at this level and request an independent review on the beneficiary’s behalf. The prescriber must notify the beneficiary about the IRE request, and the IRE will then notify the prescriber of its decision. See our Part D appeals section for more general info on appeals.
Update on involuntary disenrollment for beneficiaries who don’t pay their Part D IRMAA
Beneficiaries with higher incomes (individuals with incomes over $85,000/year and couples with over $170,000/year) pay a higher Part D premium for their drug coverage, known as the Income Related Monthly Adjusted Amount (IRMAA). (See our Part D section for more info. This additional premium is paid directly to the government, not the Part D plan.) As of April 2012, Medicare started disenrolling beneficiaries who do not pay their Part D IRMAA for at least 3 consecutive months. Medicare gives beneficiaries this 3-month grace period and if Medicare still doesn’t receive their IRMAA premiums, the beneficiaries are disenrolled.
Some dates to remember
- Oct 15 – Dec 7: Annual Election Period – The Annual Election Period (AEP) ends on Dec 7 and is the main time a beneficiary can enroll into, disenroll from or switch Part D and/or Medicare Advantage plan coverage. For more info, see our page on the AEP, also known as Open Enrollment. (Note: beneficiaries affected by Hurricane Sandy have an extended AEP. If they miss the Dec 7 date, they can call 1-800-MEDICARE anytime to make any changes fortheir 2013 coverage.)
- Dec 8 – Feb 28: Special Election Period for beneficiaries in non-renewing plans – If a beneficiary is in a non-renewing Medicare Advantage or Part D plan, s/he has a Special Election Period (SEP) to enroll into a new plan during Dec 8 through Feb 28. The new coverage will be effective the 1st of the following month.
- Dec 8 – Nov 30: Special Election Period to enroll in a 5-star plan – Beneficiaries who live in an area with a Medicare Advantage and/or Part D plan(s) that has an overall plan performance rating of 5 stars, and they are otherwise eligible to enroll in the plan, have a SEP to join that plan. Medicare posts plans’ performance ratings each fall on Medicare.gov and the ratings apply for the following calendar year. A beneficiary’s new coverage becomes effective the first day of the following month. This SEP can only be used once during Dec 8 – Nov 30.
- Jan 1 – Feb 14: Medicare Advantage Disenrollment Period (MAPD) – Beneficiaries who are in a Medicare Advantage plan with or without Part D coverage, can disenroll from their plan and return to Original Medicare anytime between Jan 1 – Feb 14. They are also given a Special Election Period (SEP) to enroll in a Part D plan during this time. But they may not enroll in a Medicare Advantage plan at this time.
For more information on Part D drug coverage, see our Prescription Drugs section. For questions and assistance, contact your local Health Insurance Counseling and Advocacy Program (HICAP) at 1-800-434-0222.