Dec 10, 2013 The Bad Doughnut – Medicare Part D’s “Doughnut Hole”

I love doughnuts! My favorite is the Maple Bar, but if you gave me an Apple Fritter I wouldn’t complain. In my opinion the doughnut is the perfect pastry; soft, sugary, and delicious. Unfortunately, the Federal Government and Medicare Part D have taken the doughnut, or the “doughnut hole,” and made it something it’s not, bad. This article will discuss the unsavory “doughnut hole” of Medicare Part D.

So what is the Medicare Part D “doughnut hole?”
The “doughnut hole” is a coverage gap in your Medicare Part D, or prescription drug coverage. It’s best illustrated with a simple example. John Doe pays a monthly premium for his outpatient prescription drug coverage under Medicare Part D. He pays 100 percent of his prescription drug costs until he reaches his prescription deductible. Once the deductible is reached he pays a certain percentage of the cost of all prescription drugs, depending on his plan, while Medicare Part D will pay the remainder of the costs. This arrangement continues until the total prescription drug costs reaches $2,850.00, for 2014.

Here is where the “doughnut hole,” or coverage gap occurs. In 2014, when total prescription costs fall between $2,850.00 and $4,550.00, John Doe’s out-of-pocket responsibilities increase. Instead of paying a small percentage for all prescription drugs, he now has to pay 47.50 percent for any brand-name drugs and 72 percent for any generic drugs. It isn’t until John Doe’s total prescription drug costs finally reach $4,550.00, that his percentage of out-of-pocket costs is reduced significantly. At this point, he will only be responsible for 5 percent of any drug costs until the end of the year.

The Medicare Part D “doughnut hole,” or coverage gap, affects millions of individuals each year and is a major financial concern for seniors whose prescription drug costs fall within above described range.

How has the Affordable Care Act (ACA) affected the “doughnut hole?”
Prior to the enactment of the ACA in 2010, Medicare Part D beneficiaries were responsible for 100 percent of their prescription drug costs while in the “doughnut hole.” That has been reduced with the passing of the ACA. Since 2011, the “doughnut hole” or coverage gap has incrementally decreased, and will continue to decrease until it no longer exists in 2020. By eliminating the “doughnut hole,” the ACA has saved Medicare Part D participants millions of dollars in prescription drug costs.

How can you reduce the effect of the “doughnut hole?”
Although the “doughnut hole,” or coverage gap is declining annually, there are things you can do right now to reduce its effect on your budget.

First, consider switching to a less-expensive drug. Using a generic alternative of a popular brand-named drug, when appropriate and available, is a great way to lessen the effect of the “doughnut hole.” Therefore, consult with your doctor to find out if there are generic or less-expensive brand-name drugs that would work.

Next, consider a 3 month supply of any medications. You can often times get a discount if you use a mail-order prescription program.

Finally, if your income and resources are below a certain level, you may qualify for the Extra Help program. By qualifying for this program the Social Security Administration may pay for some or most of the costs of your prescription drugs.

Conclusion
Medicare Part D’s “Doughnut Hole” is far from the delightful treats that we’re used to. Nevertheless, its bad taste is getting better. With annual reductions and its eventual demises in 2020, the “doughnut hole” is getting smaller and more edible.
In the meantime, consider switching to less-expensive, generic drugs and/or ordering a larger supply at a discount. In addition, qualifying for the Extra Help program, can help you muscle down the remaining bites. Soon this one bad doughnut will be gone and we’ll be left with a baker’s dozen of our favorite breakfast treat to enjoy.

The opinions expressed in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Leonard Rickey Investment Advisors, P.L.L.C, a registered investment advisor and separate entity from LPL Financial.

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