Prescription Retail Prices and the Medicare “Donut Hole”

September 8, 2011 in Health Insurance, Medicare

Recently I posted about the advantage of understanding prescription-drug reail prices — as opposed to just your own co-pays and deductibles — if you want to save a few bucks.  For seniors, this effort is even more important because of the infamous Medicare Prescription Drug Plan (PDP) “donut hole.”

Conicidentally, on September 7 the AP reported that fewer and fewer seniors were falling into the hole. (The link is to the Boston Globe version of the story.) This is good news but the following statement in the article confuses many seniors:

“This year (2011), for example, customers and their drug plans must spend $2,840 before they reach the coverage gap…”

The key words in that sentence are “and their drug plans.”  The phrasing makes $2840 sound like a lot but seniors on a Part D plan or a Part C plan with prescription drug coverage reach the donut hole a lot quicker than they think depending on the drugs they take. It happens when the drugs they buy have a retail value of $2840 (an amount that will likely be adjusted upward for 2012). The key amount is the retail value of the drugs, not the much lower amount that the seniors spend in co-pays, etc.

So, for example, if you have to take a fairly common brand name drug priced at $200 a month (for which you pay $15) instead of a generic, and you have one other generic drug on your list with a $50 a month retail value (even though you are only paying $5 for it), you’re in the hole. That might be OK if you figured it all out including the monthly PDP premium cost. But one unexpected additional prescription can run up your annual out of pocket costs dramatically and quickly.

Here’s the official Medicare document on the subject.  The basic message is that is not simple. So make your appointments now at your local senior center for updating your Part D choice (and Part C if you are on it) for 2012 because the open enrollment period has changed this year.  It now runs October 15 to December 7.

You’ll want to get into the senior center for a consultation before Thanksgiving if not sooner so you have a few weeks to think about your options. And a few weeks to ask around about retail drug prices.

1 response to Prescription Retail Prices and the Medicare “Donut Hole”

  1. Interesting calculation Dennis and a good caution about the open enrollment period. Thanks!

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