Tag: Credible Coverage

What is the Medicare Donut Hole?

What is the Medicare Donut Hole?

What is the Medicare Donut Hole?

What is the Medicare Donut Hole or Doughnut Hole?

The Medicare Donut Hole (or Doughnut Hole) is a coverage gap in the Part D Prescription Drug Plan where beneficiaries could pay more for their drugs.

The Center for Medicare and Medicaid Services (CMS) calls the coverage gap a “temporary limit” on what their drug plan will cover.

Why Did My Drugs Get More Expensive this Month?

2020 Medicare Donut Hole Explained by MedicareLifeHealth.com

During Medicare’s Annual Enrollment Period (AEP) this year I was stationed at a pharmacy a few hours a week to answer people’s questions.

One gentleman came up to me and said, “The Pharmacist sent me over to you to ask you: Why did my drugs cost more this month? I get the same drugs each month, but this month, they cost me more!”

Yes sir, you have reached the Medicare Donut Hole in your Part D Prescription Drug Coverage. It was November, and this gentleman had been able to make it his other five years on Medicare without reaching the coverage gap.

However, this year, his drug costs were a little higher, and he hit the gap before the end of the year.

Will I hit the Coverage Gap?

The price changes in the coverage gap can be a shock if you have not experienced it before. So, let’s go over a little more information to prepare you for what might come.

When Does the Donut Hole Begin?

In 2020, the Part D Coverage Gap begins when you and your plan have spent $4,020 on prescription drugs. (In 2019, it was $3,820.) Thus, if you only spend $1,000 a year on drugs, the donut hole will not affect you.

Who Does the Coverage Gap Not Apply to?

  • People who pay less than $4,020 in drugs each year.
  • In addition, people who get extra help in paying for their drug plans (for example, low income subsidies and Medicaid beneficiaies) will not enter into the coverage gap.

When Does the Donut Hole End?

In addition, you may be wondering, when does medicare donut hole end? It ends once you and your drug plan have spent $6,350 in 2020 ($5,100 in 2019). You are then out of the coverage gap and have entered into Catastrophic Coverage.

During Catastrophic Coverage you will pay a much smaller amount of money for your drugs. This includes smaller co-insurances and smaller co-payments for the rest of the calendar year.

What am I Paying in the Coverage Gap (Medicare Doughnut Hole)?

As of 2020, Medicare will pay for 75% of BOTH brand name and generic drugs in the coverage gap. As a result, you will pay 25% of the cost of your drugs in the coverage gap.

However, there is a generic to brand name drug difference in what counts towards your out-of-pocket costs to get your out of the donut hole:

  • For generics, only your copayment counts towards getting you out of the coverage gap.
  • Conversely, with brand name drugs, 95% of the total price of the drug (your co-payment and what your plan pays) counts towards your out-of-pocket costs to help you reach the end of the gap.

There are some Medicare drug plans that includes coverage in the gap. According to CMS, ” you may get a discount after your plan’s coverage has been applied to the drug’s price. The discount for brand-name drugs will apply to the remaining amount that you owe.” You will need to speak to your plan to learn more.

What Costs Counts Towards the Coverage Gap?

Here are the costs that apply to your out-of-pocket expenses:

  • First, Your Annual Drug Plan Deductible
  • Second, Your Co-insurance and Co-Payments
  • Third, Your Discount on Brand-name Drugs in the Donut Hole Coverage Gap
  • Finally, Your Costs in the Coverage Gap

Here is what does not apply:

  • Your Plan Premiums
  • Any Pharmacy Dispensing Fees
  • Any Drugs Not-Covered by Medicare Part D

Need More Information on Part D Drug Coverage?

For Part D Sign-up Assistance

2020 Medicare Donut Hole Explained by MedicareLifeHealth.com
5 Biggest Medicare Mistakes

5 Biggest Medicare Mistakes

The 5 Biggest Medicare Mistakes and How to Avoid Them

5 Biggest Medicare Mistakes

No one wants to make a mistake that will cost them hundreds (or thousands) of dollars down the road if they can help it! However, Medicare can be very confusing, and even very knowledgeable people can miss things. Here are the five biggest Medicare mistakes people make, and how you can avoid them!

#1 in Our Biggest Medicare Mistakes: Missing Enrollment Deadlines

Although the government gives us all a little wiggle room around each Medicare Milestone we pass, there are certain deadlines you must mind to avoid late penalties and inconveniences.

Original Medicare Coverage Deadlines

The 5 Biggest Medicare Mistakes and How to Avoid Them Article Pin

You will need to sign-up for Medicare when you turn 65 if you are not already getting Social Security. You will be automatically signed-up for Medicare if you are getting Social Security. In addition, you will need to tell the government if you are delaying Medicare because of other credible coverage (such as an employers coverage).

You will have three months before your birthday to sign-up, the month of you birthday, and then three months after to sign-up. However, what some people do not understand, is that if you enroll after you turn 65, your coverage will not start until the first of the month after you enroll. This could lead to a gap in your health care coverage.

A NOTE ON CREDIBLE COVERAGE: Some people will delay Medicare coverage if they have a good health plan from their employer. This is usually okay, but there is an exception for small business employers to be aware of: If your employer has less than 20 employees, you will need to enroll in Medicare right away when you turn 65.

This is because when you work for a small business, their insurance will become secondary insurance and Medicare will be your primary payer. If this is the case, you will need to enroll right away in Medicare to avoid a penalty. (Also note that Cobra is not credible coverage.)

Medigap Guaranteed Enrollment Deadlines

The last Medicare Enrollment Mistake people make is missing their Guaranteed Enrollment period for a Medigap Plan. You will have six months, from the beginning of the month you first turn 65, to enroll in a Medigap plan with a guarantee to be issued a policy. If you apply after this window, you will have to go through medical underwriting. This means that companies have the right to deny issuing you a policy based on your medical history after your open enrollment is over.

It is important to remember that Medicare Advantage Plans have a different enrollment process than Medigap. The Medicare Advantage Annual Election Period is not for Medigap Plans. Which lead us right into Mistake #2…

Medicare Mistake #2: Not Understanding Medigap Plans vs. Medicare Advantage Plans

There are two main ways you can set up your Medicare Health Care Plan: Medicare Advantage (Part C) and Original Medicare with a Medigap Plan. You either have one or the other, not both. Both can be good ways to set up your health care, but not understanding how they work can lead to making on of our biggest Medicare mistakes.

We have a whole article on Medicare Advantage vs. Medigap Plans here. I suggest reading it if you are unfamiliar with the two plan types. Considerations with these plans include how you get your Prescription Drugs and how you want to budget your money. Cash flow can be different plan to plan with premium payments and out of pocket expenses to consider when making a decision. Your lifestyle needs and travel patterns also need to be considered when making a choice between MA and Medigap.

Mistake #3: Assuming Your Doctors and Drugs are Covered

We all know what assuming can lead to… mistakes! It is very important to make sure that your doctors are covered with the Medicare option you choose. The carrier will be able to help you confirm that you will be able to continue with your current doctor if you so desire. If you are working with an Insurance Agent, they will have the ability to do this for you as well.

Checking your drug options with a plan is also an important part of finding coverage. The government does make sure that at least two kinds of drugs are available per category of treatment. Moreover, carriers will have a process for you to make an exception for a drug not on its list (called a formulary). However, it makes for a smoother transition to check ahead of time to see what is covered for your specific needs.

Biggest Medicare Mistake #4: Assuming Medicare Covers Long-Term Care

What Is Long Term Care Insurance

It is a common mistake to assume that your Medicare coverage includes long term care – it does not. Skilled nursing facilities for recovery from a certain event are covered (and come with different co-insurances based on different plans). However, long term stays in assisted living and nursing homes are not covered. You will need to have a plan in place to cover these needs. Your planning may include:

Another option, for those that do not have a lot of resources saved up for retirement, is to “spend down” your assets to qualify for Medicaid to help you in paying for your care. However, I would not suggest this option for those that have the means to plan ahead for the level of care they desire or those that want to pass money on when they pass.

Biggest Medicare Mistake #5: Enrolling Directly with a Carrier

Ok, follow me on this one. When you first turn 65, you are bombarded with advertisements for different Medicare plans. Sometimes, it feels easiest to just pick up the nearest postcard and give that insurance company a call. Or maybe you have done your research on your own (which is just fine!) and decide to enroll directly with the carrier you want to go with. Here is where you should stop and consider this as a mistake.

Here is the problem: when you enroll with an insurance company for one of their plans directly, you have to deal with them alone. On the other hand, when you enroll with that same company through an independent insurance agent, you now have an advocate and support system to help you work with that carrier.

Here is how an independent agent helps:

  • First, if something goes wrong, you can call your agent for help! You are not on your own, and this is a big deal. As we all know, everyone can make mistakes – you, your doctor’s office, your insurance company. When these mistakes happen, you can call your agent for support and they can work with you and the insurance company to make sure you are taken care of.
  • Second, rates and plans change! A good independent agent will keep on top of industry changes and plan changes for you. They can stay on top of your premium rates and what might be new or changing in your area to make sure you always have the best coverage. You will not get this level of service when you work directly with a carrier.
  • Finally, you do not pay anything extra for working with an independent agent. They are still paid as an independent agent from Whichever company you are placed with at no charge to you.

Medicare Mistakes Summary

In addition to this article, another great resource is the Medicare and You book put out by the government. Since this is a large (120 page) document, we have created a Medicare and You User’s Guide for you to read and reference here.

In summary, you can avoid the biggest Medicare mistakes with a little research and a little help.

Reach out to a professional to answer any of your market specific questions and find out more about Medicare, Medicare Advantage, Medicare Supplements, and their differences here on MedicareLifeHealth.com.

Further Reading:

Medicare Penalties For Late Enrollment

Medicare Penalties For Late Enrollment

What are the Medicare Penalties for Late Enrollment?

There are two main Medicare penalties for late enrollment to be aware of when you are planning your health care in retirement. The first is the Part B late enrollment penalty, and the second is the Part D late enrollment penalty. Let’s look at both penalties and how you can avoid them.

If you need some definitions and background, please read the following articles:

Part B (and Part A) Late Enrollment Penalties

As you may recall, there are two parts to Original Medicare – Part A and Part B. Most people will get Part A without paying a monthly premium. Part B has a premium you pay for. As a result, the Part B late enrollment penalty is more common. Just to be through, we will cover both.

When Do These Part A/B Late Enrollment Penalties Apply?

The Medicare Part A and B Late Enrollment Penalties apply to those people who do not have “credible” health care coverage when they age into Medicare at 65. What if you have health care with your employer at 65? Then, you will let the government know you will be delaying your use of Medicare until that coverage ends. In this case, you would not have a penalty.

Part D Late Enrollment Penalty

The Part D Prescription Drug Coverage part of Medicare also comes with a late enrollment penalty. It applies if you do not sign-up when you are first eligible or if you go 63 days or more without coverage at any point. In addition, late penalties are added to your Part D premium for as long as you have Part D.

How much you pay as a penalty can be calculated with a little basic math whipped up by the government:

Medicare calculates the penalty by multiplying 1% of the “national base beneficiary premium” ($33.19 in 2019 and $32.74 in 2020) times the number of full, uncovered months you didn’t have Part D or creditable coverage. The monthly premium is rounded to the nearest $.10 and added to your monthly Part D premium.

Straight from this page on Medicare.gov

When Does the Part D Late Enrollment Penalty Apply?

If you are eligible for Medicare and do not have Part D coverage or other credible coverage (i.e. from an employer plan) for over 63 days, you will get a penalty. The penalty will not apply to those with credible coverage. This can be from work health plans, VA drug plans, and Part C (MAPD) plans. Of course, from Part D Prescription Drug Plans are credible coverage as well.

Late Enrollment Penalties Summary

In summary, you can avoid the Medicare late fees and penalties with a little bit of planning and research. One great resource for learning more about these penalties is the U.S. Government’s Medicare and You Guidebook. You can read our User’s Guide/Review of this book (and learn how to get a copy if you need one) here.

medicare penalties for late enrollment
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