The Medicare Drug Program Doughnut Hole Gap Is Bigger Than You Think

Rudy before the quest for Medicare.
Rudy before the quest for Medicare. | Source

The Quest for Medicare

Just very recently I helped someone (let's call him Rudy) in the quest to go off his regular health insurance and sign up for Medicare, the American healthcare plan for the elderly. This was not by choice; it was a Medicare mandate. Quest is a good term for the process: A long and arduous search for something. Rather than try to explain the false starts and dead ends and total confusion of the whole process, I thought I'd just write about the doughnut hole (sometimes spelled “donut hole”) in the Medicare drug coverage, since 1) it was widely mentioned in the news and 2) it doesn't work anything like I thought. Rudy and I are not stupid, but the quest nearly reduced me to a blithering idiot. Rudy did not fare so well.

Background

Please bear with me for a paragraph of “background”-- I promise I will get to the heart of the doughnut hole confusion forthwith. Medicare Part D deals with prescription drug coverage. You have to pick a locally-available drug plan offered by some third party if you want such coverage. If you don't pick one when you go on Medicare, your premium will continuously and permanently rise should you later change your mind. It's quite an adventure comparing plans: the premiums differ (we ended up with one that cost $35.40 per month), some have a deductible, the drugs covered may differ, restrictions and allowed quantities may differ, there are different co-pays, etc. in other words, just like trying to buy regular insurance except they cannot turn you down. They all have the doughnut hole.

The PERCEIVED journey from coverage, across the No Man's land of no coverage and back into coverage.
The PERCEIVED journey from coverage, across the No Man's land of no coverage and back into coverage. | Source

What I Thought the Doughnut Hole Was

So here's what I thought the doughnut hole was (as of 2012): When the cost reaches $2,930, you are on your own (although, see “There Is Some Doughnut Hole Good News” below) until the cost reaches $4,700, when your coverage kicks back in. Of course “cost” is the key word, so I was prepared for “cost” to be either the true cost of the drugs or the out-of-pocket costs to individual.

If cost is the true cost of the drugs, that means you will hit the doughnut hole far sooner than you think (bad) but you will traverse the hole just as fast (good).

If the cost is your out-of-pocket expense, you will not hit the doughnut hole for a longer time (good) but you will be on your own for $1,770 (bad).

The ACTUAL journey from coverage, across the No Man's land of no coverage and back into coverage.
The ACTUAL journey from coverage, across the No Man's land of no coverage and back into coverage. | Source

What the Doughnut Hole Is

The truth is, it's the worst of both. You will hit the doughnut hole based on the true cost of the drugs. Then time slows down (Medicare can do that) and you are in the doughnut hole until your out-of-pocket costs reach $4,700.

Rudy's Concrete Example

For a more concrete example, Rudy will pay approximately $86 per month based on his current pharmaceutical needs (Rudy is diabetic). The $86 does not include his premium. After about six months, he will hit the doughnut hole after spending a little over $500 for drugs and $200 in premiums because the actual cost of the drugs (the MSRP, if you will-- and you know who sets the Manufacturer's Suggested Retail Price) is almost $500 per month. So, in six months, he will be in his own personal doughnut hole of $700 to $4,700. He is unlikely to emerge on the other side of the doughnut, but his coverage will restart on January 1, since it resets each year.

With his coverage starting June 1, 2012, Rudy will enter the doughnut hole around December. In January 2013, his coverage will restart and he will re-enter the doughnut hole around July 2013.

There Is Some Doughnut Hole Good News

Now, there is some good news-- though not to Conservatives who already have great coverage. In 2011, the Affordable Care Act mandated that, while in the doughnut hole, listed brand name drugs will be covered by 50%. Because Rudy's costliest drugs are on the list, while he is in the doughnut hole, his monthly prescription costs will rise from $86 per month to $297, instead of over $500.

The figures used for Rudy's situation are real, but do not account for unexpected prescriptions that Rudy may require in future.

Rudy after the quest for Medicare.
Rudy after the quest for Medicare. | Source

Medicare Is Complicated-- Get Help

As you can see in this example-- a tiny sliver of the Medicare system-- whether it's good news or bad, it's vastly complicated and compounded by partial privatization. You can't go to one place for all the answers, though a good starting place is medicare.gov. Also, avail yourself of any local government and non-profit agencies. You will likely end up talking to an insurance agent, but I advise you to end up there and don't start there. Agents are, after all trying to make a living and are likely to be biased toward plans that they get a commission on.

An Aside: Spousal Benefit Reduced by Early Retirement

It is important to keep on top of the rules and regulations when it comes to Social Security, Medicare, etc. A case in point: Several years ago you could retire at 62, start receiving benefits and, if you changed your mind, you could pay back the monies received and retire later, receiving higher benefits. When it was discovered that the spousal benefit percentage was also tied to when you retired, by retiring at 62, the spousal benefit was reduced to 35% instead of the 50% so often touted. This was enough to warrant paying back the monies and resetting the wife's retirement.

Unfortunately, they'd changed the rules without informing people. The option to repay and reset had been quietly removed. Since this was classified as a “procedural” rule, they weren't obligated to inform recipients of the change or grandfather the change in. Anyone who had thought they had the right to change their mind were permanently stuck at the lower percentage.

Conclusion

In conclusion, the Medicare Drug Plan's doughnut hole is wider than you thought, though perhaps not as deep as you thought and the process is more confusing than you feared.


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Comments 12 comments

Dennis Byron 4 years ago

Where does Rudy live? Check out your local State Pharmaceutical Assistance Program if it has one. In addition, anyone that qualifies for Extra Help from Social Security cannot fall into the donut hole anytime during the year.

(Also, it's no consolation to Rudy but less than one in 10 seniors fall into the hole. And I think what you are saying is that Rudy gets about $6000 worth of medication a year for around $2400. Six years ago he would have had to pay the full $6000.)


UnnamedHarald profile image

UnnamedHarald 4 years ago from Cedar Rapids, Iowa Author

Thanks for commenting, Dennis Byron. No, Rudy doesn't qualify for help and there is obviously a big benefit to joining and paying the premium, as you point out. But it is overly complicated, which is my point. Outside the scope of this article is the fact that the drug companies charge more than $450 a month for insulin (Rudy has been put on an advanced system by his doctor). Rudy's actual insulin needs are not exorbitant-- about "normal". It seems every time insulin comes close to becoming "generic" they come up with a new twist, hence able to be a brand. Obviously, insulin is a very good thing for millions of people, but that doesn't mean they are not being taken advantage of.


ib radmasters profile image

ib radmasters 4 years ago from Southern California

The real problem is the sadistic b.....that allowed the insurance companies separate pharmaceuticals from healthcare. They are not separated when you have it on your hospital bill, so why the separation. Probably 90 percent of the visits to the doctors include a prescription.

And Medicare is just following suit with the private health insurance companies practice.

Fix the separation and the donut hole goes away automatically.


xstatic profile image

xstatic 4 years ago from Eugene, Oregon

Great comments on this and good info on the Hub. I am lucky to need no meds, and able to get premium coverage for a zero cost over what is deducted from my SS. My wife hit the donut hole two years ago, and it was painful for a while.

I agree with ib on that ridiculous prescription drug program that W foisted off on us. It creates nothing but confusion.


UnnamedHarald profile image

UnnamedHarald 4 years ago from Cedar Rapids, Iowa Author

ib radmasters, I fear that even IF the Supreme Court upholds the health care initiative, we will end up with a Frankenstein monster. Don't get me wrong, I think there are more positives than negatives (letting people with pre-existing conditions buy healthcare, for example) but the confusing rules and blending in privatization... well, a lot of people disagree in this country, but I would have rather seen a single-payer National Health Program and reduce the profit motive in the system. Thanks much for commenting.


UnnamedHarald profile image

UnnamedHarald 4 years ago from Cedar Rapids, Iowa Author

Hi, xstatic. Thanks for commenting. I think a lot of people are absolutely lost with all the decisions they have to make going onto Medicare. They are always advised to look into all the possibilities, but it's overwhelming. I've always had problems comparing insurance plans-- there are so many variables to consider.


ThelmaC profile image

ThelmaC 4 years ago from Blue Ridge Mountains, USA

You are absolutely right UnnamedHarald about it being a confusing situation. It is very sad that older people have to try to make a decision about health care and many, like your friend Rudy, need help in the process. He is very fortunate to have you to help him. Many folks aren't that lucky.


UnnamedHarald profile image

UnnamedHarald 4 years ago from Cedar Rapids, Iowa Author

Thank you, ThelmaC, for reading and commenting. I wonder what other people in other countries have to go through--it's hard to imagine an entry system more convoluted than ours. Secretly, I might feel a little better if we're not the worst:)


Deborah Brooks profile image

Deborah Brooks 4 years ago from Brownsville,TX

Oh gee.. it is confusing.. I am scared to sign up.. right now we do not have to but we are getting closer every day.

bless you for writing this

Debbie


UnnamedHarald profile image

UnnamedHarald 4 years ago from Cedar Rapids, Iowa Author

I know how you feel, Deborah. It's sort of like something is looming over you. I suggest you call your local social security office because they will probably steer you to a local agency staffed to guide you through the process. Good luck! Thank you for reading and your kind comment. "Rudy" waited till 2 weeks before coverage started and needed to apply for both supplemental and drug coverage starting June 1. The supplemental has accepted him, but still waiting to hear from the drug plan company.


TIMETRAVELER2 profile image

TIMETRAVELER2 3 years ago

Once Obamacare really gets going I believe the government will start negotiating drug costs much as Canada does. Once this happens, the problems you discuss here should be mostly alleviated. We should also remember that prior to Part D, there was NO drug coverage in Medicare, so people had to pay the full amount, which was a really bad situation for those who needed expensive meds. Obviously, changes are needed, and I feel they are coming...but slowly. Good article.


UnnamedHarald profile image

UnnamedHarald 3 years ago from Cedar Rapids, Iowa Author

I am cautiously-- almost pessimistically-- optimistic that things will improve (but not counting on it) and, of course, it is much, much better than no drug coverage, though it ain't free. Just be aware of misleading "bumper-sticker" knowledge-- those accounting games and rules get you every time and they are rarely in your favor. Thanks so much for reading and commenting, Timetraveler2.

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