❯❯ Phase 3, the coverage gap: This gap – often called the doughnut hole – begins when you hit the limit of initial coverage and ends if and when the amount you’ve spent out-of-pocket on drugs from the beginning of the year hits another dollar limit set in law ($4,700 in 2015; $4,850 in 2016).
Until 2011, you would’ve had to pay 100 percent of the cost of your drugs in the gap. Now you pay a lot less because under the Affordable Care Act, the gap is gradually shrinking. In 2015 and 2016, you get a discount of 55 percent on brand-name drugs in the gap. For generic drugs, you get a discount of 35 percent in 2015 and 42 percent in 2016. These discounts, which come partly from the drug manufacturers and partly from the government, get larger until by 2020, you pay no more than 25 percent of the cost of any drugs in the gap. What’s more, the manufacturers’ discounts on brand-name drugs count toward the dollar out-of-pocket limit that gets you out of the gap; that is, you get credit for having paid full price even though you’re receiving the discount. But for any discounts funded by the government, such as those for all generic drugs, only what you pay counts toward getting out of the gap. (I explain the gap in more detail in Chapter 14.)
❯❯ Phase 4, catastrophic coverage: If your drug costs are high enough to take you through the gap, coverage kicks in again. At this point, your share of the costs drops sharply. You pay no more than 5 percent of the price of each prescription. Catastrophic coverage ends on December 31. The next day, January 1, you return to Phase 1 (or Phase 2 if your plan has no deductible), and the whole cycle starts over again.
Figure 2-1 is a quick way of looking at the same cycle of coverage.
© John Wiley & Sons, Inc.
FIGURE 2-1: Phases of Part D drug coverage and dollar limits.
Figure 2-2 shows this information in a different way. Here, you can see examples of brand-name drugs costing (for the sake of simplicity) $100, $200, or $300 per one-month prescription – and what you’d pay for them in each phase of coverage. These examples assume co-pays during the initial coverage period of $45 for each prescription, although co-pays vary widely among Part D plans.
© John Wiley & Sons, Inc.
FIGURE 2-2: Examples of costs through four phases of coverage.
Finding out about formularies
❯❯ You usually have to pay the whole tab for drugs that aren’t covered. Your plan pays its share of the cost during the initial and catastrophic coverage phases (Phases 2 and 4). But for any drug the plan doesn’t cover, you pay full price in all phases of coverage unless you win an exception from the plan. (I explain about coverage exceptions in Chapter 14.) The difference in your out-of-pocket expenses between a covered and uncovered drug can be hundreds of dollars a month.
❯❯ You don’t get doughnut hole credit for uncovered drugs. If you fall into the doughnut hole (Phase 3), the cost of any drugs not covered by your plan doesn’t count toward the out-of-pocket limit that gets you out of the gap and triggers low-cost catastrophic coverage.
❯❯ You’re more likely to properly fill and take your medicines. You need the meds you’re prescribed for the sake of your health. If you get coverage for them and don’t have to pay full price, you’re much more likely to fill all your prescriptions and not skip doses.
No Part D plan covers all prescription drugs, and the number covered varies greatly among plans. In 2015, the percentage of drugs that are covered ranges from 50 to 68 percent among the ten Part D plans with the most people enrolled, according to an analysis by the health research group Avalere Health. So the goal is to choose a plan that covers all, or at least most, of the specific drugs you take. I describe a strategy for doing so in Chapter 10.
In the following sections, I note the drugs that Part D has to cover and the ones that it doesn’t pay for.
Laying out the drugs Part D plans must cover
Although Medicare law doesn’t require Part D plans to cover every drug, it does insist that each plan covers at least two drugs in each class of medications. A class means all the similar drugs that are used to treat the same medical condition. Many plans cover more than two in each class. But every plan must cover “all or substantially all” drugs in each of the following six classes:
❯❯ Anticancer drugs (used to halt or slow the growth of cancers)
❯❯ Anticonvulsants (used mainly to prevent epileptic seizures)
❯❯ Antidepressants (used to counteract depression and anxiety disorders)
❯❯ Antipsychotics (used to treat mental illnesses such as schizophrenia, mania, bipolar disorder, and other delusional conditions)
❯❯ HIV/AIDS drugs (used to block or slow HIV infection and treat symptoms and side effects)
❯❯ Immunosuppressants (used to prevent rejection of transplanted organs and tissues and treat immune system disorders and some inflammatory diseases)
Medicare requires every Part D plan to cover pretty much all drugs in these categories because of the clinical problems that can occur when patients abruptly stop taking such medications or switch to others.
Recognizing the drugs Medicare doesn’t pay for
❯❯ Medicines sold over the counter (not needing a doctor’s prescription)
❯❯ Drugs used for anorexia, weight loss, or weight gain
❯❯ Drugs used for cosmetic reasons and hair growth
❯❯ Drugs used to promote fertility
❯❯ Drugs used to treat sexual or erectile dysfunction
❯❯ Medicines used to treat cough or cold symptoms
❯❯ Prescription vitamins and mineral products
Sometimes Medicare will pay for medications in these categories if they’re used for a “medically acceptable” purpose – for example, cough medicines when prescribed by a doctor to alleviate medical conditions such as asthma, drugs for impotency when prescribed to treat different medical conditions that affect veins and arteries, or antismoking drugs if prescribed by a doctor rather than bought over the counter.
Until 2013, Medicare also excluded barbiturates (used for anxiety and seizures) and benzodiazepines (used for anxiety and sleeping problems) because these drugs are often abused. But the ban has now been lifted wholly on benzodiazepines. And Part D coverage for barbiturates is allowed when prescribed to treat epilepsy, cancer, or chronic mental disorders.
Determining when drugs are covered by Part A, Part B, or Part D