Closing the Coverage Gap— Medicare Prescription Drugs Are Becoming More Affordable
The Affordable Care Act includes benefits to make your Medicare prescription drug coverage (Part D) more affordable. When you’re in the coverage gap (also called the “donut hole”) in your Medicare prescription drug coverage, you’ll get the following:
• A discount on covered brand-name drugs when you buy them at a pharmacy or order them through the mail.
• Some coverage for generic and brand-name drugs.
• You can expect additional savings on your brand name and generic drugs during the coverage gap over the next several years until it’s closed in 2020.
• The coverage gap closes by maintaining the 50% discount the manufacturers offer and increasing what Medicare drug plans cover.
What’s the coverage gap, and how will I know if I’ve reached it?
Some Medicare drug plans have a coverage gap. This means that after you and your drug plan have spent a certain amount of money for covered drugs, you may have to pay more for your prescription drugs up to a certain limit.
Each month that you fill a prescription, your drug plan mails you an Explanation of Benefits (EOB) notice, which tells you how much you’ve spent on covered drugs and if you’ve reached the coverage gap.
Who can get the savings while in the coverage gap?
You can get the savings if all of the following are true:
• You’re currently enrolled in a Medicare Prescription Drug Plan (including employer group health and waiver plans) or a Medicare Advantage Plan (like an HMO or PPO) that includes prescription drug coverage.
• You don’t get Extra Help (a Medicare program that helps people with limited income and resources pay Medicare prescription drug costs).
• You’ve reached the coverage gap.
How does the coverage gap discount work for brand-name drugs?
Companies that make brand-name prescription drugs must sign agreements with Medicare to participate in the Medicare Coverage Gap Discount Program. This program requires the companies to offer discounts on brand-name drugs to people who have reached the coverage gap. These discounts, along with increased coverage in the coverage gap, mean that once you reach the coverage gap in 2013 and 2014, you’ll pay 47.5% of the plan’s cost for covered brand-name prescription drugs. You get these savings if you buy your prescriptions at a pharmacy or order them through the mail. The discount will come off of the price that your plan has set with the pharmacy for that specific drug.
Although, you’ll only pay a certain percent of the price for the brand-name drug, the entire price (including the discount the drug company pays) will count toward the amount you need to qualify for catastrophic coverage. Once you reach catastrophic coverage, you only pay a small coinsurance or copayment for the rest of the year. Your EOB notice will show any discounts the drug companies paid.
Example: Mrs. Anderson reaches the coverage gap. She goes to her pharmacy to fill a prescription for a covered brand-name drug. The price for the drug is $60 and the dispensing fee is $2. Mrs. Anderson will pay 47.5% of the plan’s cost for the drug and dispensing fee ($62 x .475 = $29.45). Mrs. Anderson will pay $29.45 for her prescription, but $59.45 will be counted as out-of-pocket spending and will help Mrs. Anderson get out of the coverage gap because both the amount that Mrs. Anderson pays ($29.45) plus the manufacturer discount payment ($30.00) count as out-of-pocket spending. The remaining $2.55, which is 2.5% of the drug cost and 52.5% of the dispensing fee paid by the drug plan, isn’t counted toward Mrs. Anderson’s out-of-pocket spending.
Once I’ve entered the coverage gap, will all Medicare-covered brand-name prescription drugs be discounted?
If a drug company has signed an agreement to participate in the Discount Program, all of the covered Part D brand-name drugs they make are covered during the coverage gap for that calendar year. This includes prescription drugs on the plan’s formulary (list of covered drugs) and those covered through an appeal. Manufacturers that make more than 99% of the brand-name drugs used by people with Medicare participate in this program.
How is coverage for generic drugs changing in the coverage gap?
In 2013, Medicare will pay 21% of the price for generic drugs during the coverage gap. You’ll pay the remaining 79% of that price. What you pay for generic drugs during the coverage gap will decrease each year until it reaches 25% in 2020. The coverage for generic drugs works differently from the discount for brand-name drugs. For generic drugs, only the amount you pay will count toward getting you out of the coverage gap.
Example: Mrs. Anderson reaches the coverage gap in her Medicare drug plan. She goes to her pharmacy to fill a prescription for a covered generic drug. The price for the drug is $20 and there is a $2 dispensing fee that gets added to the cost. Once the 21% coverage is applied to the $22, she’ll pay $17.38 for the covered generic drug. The $17.38 amount she pays will be counted as out-of-pocket spending to help her get out of the coverage gap.
What if I don’t get a discount, and I think I should?
If you think that you’ve reached the coverage gap and you don’t get a discount when you pay for your brand-name prescription, you should review your next Explanation of Benefits (EOB) notice. If the discount doesn’t appear on the EOB, you should work with your drug plan to make sure that your prescription records are correct and up-to-date. If your drug plan doesn’t agree that you’re owed a discount, you can appeal. You can get help filing an appeal from your State Health Insurance Assistance Program (SHIP) or by calling 1-800-MEDICARE (1-800-633-4227). TTY users should call 1-877-486-2048. Visit Medicare.gov/contacts, call 1-800-MEDICARE, or look at the back cover of your “Medicare & You” handbook to get the phone number for your local SHIP.
What if I have other insurance?
If your other insurance coverage pays second, it will pay after you get the discount.
What if I have coverage from a State Pharmacy Assistance Program (SPAP)?
If you’re enrolled in a State Pharmacy Assistance Program (SPAP), or any other program that gives coverage for Part D drugs (other than Extra Help), you still get the discount on covered brand-name drugs. The discount is applied to the price of the drug before any SPAP or other coverage.
I already get discounts from the company that makes my drugs.
How will this new program affect these discounts?
Patient assistance programs that drug companies offer are different from the Medicare Coverage Gap Discount Program. You can check with the drug company to find out if its assistance program will change.
Will I get more savings once I reach the coverage gap if I have a Medicare drug plan that already includes coverage in the gap?
Yes. You may get a discount after your plan’s coverage has been applied to the price of the drug. The discount for brand-name drugs will apply to the remaining amount that you owe. For example, if you’re in a drug plan that offers 60% coverage on brand-name drugs in the coverage gap and you fill a $100 brand-name prescription, the cost of your prescription after your plan’s savings is $40. The 50% manufacturer discount would get applied to the $40 amount so that you only pay $20. The entire $40 paid by you and the manufacturer will count as out-of-pocket spending and help you get out of the coverage
I already get Extra Help from Medicare to help pay my prescription drug costs. Can I get the discounts too?
No. If you get Extra Help, you already get coverage for your prescription drug costs during the coverage gap.
What happens if I fill a prescription and only part of the amount is in the coverage gap?
The discount will apply only to the portion of your claim that’s in the coverage gap. For example, if you fill a prescription that costs $100, and only $50 of that cost is in the coverage gap, the discount and increased coverage will only apply to that $50. In this case, you would pay your normal copayment on the $50 portion of the prescription that’s not in the coverage gap, plus $23.75 (47.5% of the $50 portion that’s in the coverage gap).
How will I know if my prescription will be covered at a discount and what should I do if it isn’t?
Contact your drug plan or ask your pharmacist if the prescription drugs you take are covered at a discount during the coverage gap. Your brand-name drug will be covered under Part D, and it’ll be discounted if it’s made by a drug company that’s participating in the Medicare Coverage Gap Discount Program and you reach the coverage gap. If your brand-name drug is made by a drug company that has chosen not to participate in the Discount Program, the drug won’t be covered under Part D at all. If your drug isn’t covered, talk to your doctor or other health care provider to find out if there’s another drug that you can take.
What additional discounts and savings will I have over time in the coverage gap?
Over the next several years, you pay less in the coverage gap until it’s closed by 2020. By 2020, you’ll pay only 25% for covered brand-name and generic drugs during the gap— the same percentage you pay from the time you meet the deductible (if your plan has one) until you reach the out-of-pocket spending limit (up to $4,750 in 2013).
You’ll Pay this Percentage You’ll Pay this Percentage
for Brand-name Drugs in for Generic Drugs in the
the Coverage Gap Coverage Gap
2013 47.5% 79%
2014 47.5% 72%
2015 45% 65%
2016 45% 58%
2017 40% 51%
2018 35% 44%
2019 30% 37%
2020 25% 25%
Get Your Questions Answered
• Visit Medicare.gov, or call 1-800-MEDICARE (1-800-633-4227), for more information about the closing of the coverage gap. TTY users should call 1-877-486-2048. You can also contact your plan.
• For general information about Medicare prescription drug coverage, visit Medicare.gov/publications to view the booklet, “Your Guide to Medicare Prescription Drug Coverage.”
• For information on how to lower your prescription drug costs, visit Medicare.gov/publications to view the fact sheet, “4 Ways to Help Lower Your Prescription Drug Costs.”
• If you have limited income and resources, you may qualify for Extra Help from Medicare to help pay your prescription drug costs. Visit socialsecurity.gov, or call 1-800-772-1213 to apply. TTY users should call 1-800-325-0778.
• Visit stopmedicarefraud.gov to learn how to prevent, detect, and report Medicare fraud and abuse.