Explaining the “donut hole” in Part D
From the LA Times On-line:
When a government program is defined in terms of a void at its core, you know it’s trouble. In the case of the new Medicare drug benefit, that void has been evocatively named the “doughnut hole.” This is a gap in coverage beginning when the full cost of an enrollee’s prescriptions for a year reaches $2,250 (including co-pays, a $250 deductible and the amount the customer’s health plan pays for the drugs), and ending when the enrollee’s own out-of-pocket expenses reach $3,600. After that point, Medicare will pay 95% of qualified drug costs to the end of the calendar year, a so-called catastrophic benefit.
The doughnut hole was designed to limit the new program’s burden on taxpayers. But its complexity is one reason that fewer than 4 million seniors eligible for the stand-alone drug benefit have enrolled so far, well short of the 23 million who are eligible.
Because of the doughnut hole, a plan that appears at first blush to be an inexpensive option — one carrying a low monthly premium, for example — may be the most costly in reality. That’s because some plans with high premiums provide discounted drug coverage even within the doughnut hole. Patients who know their prescriptions will cost more than $2,250 a year might save money by choosing an option with a $60 monthly premium and gap coverage, instead of a plan with a $5 premium that consigns the member to doughnut hole hell.
Such calculations are intricate and individual. The variations in premiums, coverage terms and rosters of covered drugs (known as “formularies”) make the comparison of plans head-to-head extremely difficult, if not impossible — a gift for the private health insurers that sponsor the plans.