Medicare Part D and the Coverage Gap

This is the second in a series of posts about choosing a Medicare Advantage plan. You can read the first post, Traditional Medicare vs Medicare Advantage Products here.
Now that you’ve decided that you want a Medicare Advantage plan, the next decision is whether or not you want one with the covers Medicare Part D- Prescription Drugs. You do not have to opt for a drug benefit from Medicare, and even if you do want Part D coverage and a Medicare Advantage plan, you do not have to have Part D coverage as part of your MA plan- you can leave that strictly up to Medicare.
Please note that your Part D benefit is determined by your financial status.
There are MA plans out there that do not have Part D benefits. These tend to offer a considerable number of other “better than Medicare” benefits for less money than plans offering similar non-Rx benefits and Rx coverage. (My company offers one of these plans.)
If you have a lot of prescriptions, or some really expensive ones, you want to make sure you have prescription drug coverage of some sort. The important thing to note about Part D coverage (and the coverage provided by a lot of MA plans) is what is called the “Gap.”
Medicare and all MA plans that carry Part D coverage will cover up to $2,930 (for the 2012 benefit year) in Rx costs for the year. One you’ve reached that amount, there is a gap, or donut hole until you have spend $4,700, during which Medicare (and many MA plans) pay nothing toward your Rx costs.
If you think you are in danger of hitting the gap, talk to your pharmacy. If you fill all of your prescriptions in one place, they should be able to tell you how close you are to hitting the coverage gap.
I will say, this was something we worried about the first year we were helping the MIL make this decision, as she seems to have a lot of meds. But, with careful use of generics where possible, she has never hit the coverage gap.
Remember what I said in the previous post that MA plans can NOT offer coverage that is worse than traditional Medicare in any way. This means that those with MA plans that don’t have gap coverage still qualify for the Medicare gap “benefits”.
Basically, while you are in the gap, for brand name drugs, you can only be charge 50% of the retail price (the full price counts toward getting out of the gap), and you’ll pay a maximum of 86% on generic drugs. (Source)
However, some plans offer gap coverage, including regular co-pays for generic or brand name drugs. These plans will tend to be the more expensive or limited plans, so make sure you meet the plan requirements and then, run the math.
The gap in 2012 is $1,770. If all of your drug are generics, you will never pay more than 86% of this amount, so $1,522.20 (and less if you are getting brand name drugs). That means that if gap coverage is your only consideration, you shouldn’t be paying a premium of more than $126.85/month- and that’s only if they offer 100% coverage during the gap. If their gap coverage is worse than that, then the maximum premium you’re willing to pay should also go down.
Now, every Part D plan that I have ever seen that costs over $100/month in additional premium (as compared to what you already pay for Medicare), offers benefits above and beyond gap coverage, so you’ll want to take those into account.