Medicare and donut holes.

by Michael on March 2, 2009

in Medicare,Prescriptions

donutholes-360My wife has a kid brother. He was born when his siblings were all entering their teens, so as teenagers always seem to do – they had lots of fun with the “baby.” I’m told he had a habit of innocently asking their mother at meal time, “Mama, do I like this?” His mother would assure him that he “liked” whatever it was on his plate, and he would then begin eating his meal.

The same thing happened at other times – times like when they were having a treat of some sort. “Mama, do I like this?” He’d ask. “Oh absolutely,” his mother would respond, and then he’d discover the newest “flavor of the month” or whatever treat was being experienced. Obviously, he trusted his mother’s opinions.

The teenagers, of course (my wife included), thought of all the times they were told it didn’t MATTER if they liked it or not – eat it. But those were different times, and this was, after all, “the baby” of the family.

Soon, though, the teenagers decided to have a little fun with him. The next time he asked the question over something maybe THEY would be happy to eat for him they jumped on it. “Mama, do I like this?” he asked. “OH NO! You don’t like it at all, they chimed. Here, I’ll eat that for you!” And he obligingly handed over a cookie or the newest flavor of the month at the ice cream parlor. Of course, “Mama” eventually put a stop to such shenanigans, and he grew up to be a fine man despite his siblings.

What’s all that got to do with donut holes?

Well, you might be asking a very similar question as my brother-in-law once did if you hear something about “donut holes” when your Medicare policy is being explained to you by your trusted insurance agent. “Do, I LIKE donut holes?”

And the answer to that question is,  well… “it depends.” It depends on which ones we’re talking about. Are we talking – sweet, deep-fried middles of pastries here? Then, I’d be willing to say “Yes!”

If we’re talking about an insurance “donut hole” then  I’m betting “No,” you don’t like those.

Just what in the heck IS an insurance donut hole anyway? It’s a term applied to the period of time in “Part D” of Medicare (that is the prescription plan) where the plan pays zero, zilch, nada (although, actually some plans do pay for generic drugs through this period) – and you have to pay out of your own pocket for your medicine.  This period of no drug benefit begins when your prescription drug costs reach $2700 (some plans start earlier) – until you have total costs of $4350. The amount between $2700 (or the lower amount) and $4350 is the donut hole. After this, catastrophic coverage kicks in and this benefit is, in general, pretty good. But that donut hole – ouch! – we didn’t like it…did we?

If your plan has a “donut hole” in it – how can you make that kind of donut hole more palatable? You must plan for it. When your prescription drug costs hits a certain amount in a year, you will hit the donut hole. So the smart thing to do is budget for that period… sorry, but it’s a necessity if you have drug costs that exceed $2700 in a year.  Whether you are told you have a monthly deductible or not, if you spend more than $2700 per year on prescription drugs, you DO have what amounts to an annual deductible. That “deductible” can be calculated as the initial deductible (some plans have an initial deductible of $295, some don’t) PLUS the “donut hole” – that’s the amount you spend after you hit the $2700 limit and when your plan picks up again paying.

Now take that total amount and divide by 12, and that is how much – in addition to whatever premiums you pay and co-pays you pay – that you need to budget each month in a year to cover your total drug costs.  For most people this likely is not going to be an issue, but for some who have excessive drug expenses – be sure to do your best to plan for this “gap”.

Hopefully, I’ve helped you understand this feature at least somewhat better. Clearly, they were taking their analogy from the empty space part of a donut – not the sweet little nuggets of pleasure to occasionally accompany a hot beverage.

I’m still betting you won’t like this kind of donut hole, but planning (budgeting) for it can at least make it a little easier to swallow.

I am always here to answer your questions and help guide you in the selection of your prescription drug plan, so give me a call or send me an e-mail, we’ll talk.

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