Q: Were there changes in the Medicare Part D prescription drug coverage for 2016?
A: Yes. The maximum deductible is slightly higher, and there are several changes to the “donut hole.” As a refresher, the Medicare Part D program was designed with a gap in coverage: beneficiaries’ drug expenses are covered up to a certain dollar amount, uncovered up to another amount, and then coverage kicks in again. The gap in coverage is called the donut hole.
The Medicare Part D maximum deductible increased by $40 for 2016, to $360. This is the largest increase in the program’s history, and there will be another $40 increase for 2017. But many drug plans have no deductible or a deductible that’s lower than the maximum allowed.
The initial coverage limit (i.e., where the donut hole begins) is higher in 2016. It was $2,850 in 2014, increased to $2,960 in 2015, and to $3,310 in 2016. Before this amount is reached (but after the deductible is met), the enrollee pays either copays (fixed dollar amounts) or coinsurance (a percentage of the drug’s cost) for each medication they need – the specifics vary from plan to plan. When the total combined cost reaches $3,310 in 2016, the enrollee will enter the donut hole.
The upper threshold for the donut hole also increased in 2016, from $4,700 to $4,850. After your spending has reached this point, you’ll be in the catastrophic coverage range, which means you’ll only pay five percent of the plan’s costs for medications.
The percentage you have to pay for brand-name drugs while in the donut hole is the same in 2016 as it was in 2015. Once your total drug costs (including what the plan pays plus your deductible and copay) reach $3,310, you will pay 45 percent of the plan’s cost for brand-name drugs. But for generics, you’ll pay only 58 percent of the plan’s costs – down from 65 percent in 2015.
For brand-name drugs, even though you only pay 45 percent of the cost, 95 percent of the cost is applied to your out-of-pocket accumulation, helping you get out of the donut hole faster. For generics, only the 58 percent that you pay is counted towards your out-of-pocket total.
A provision in the Affordable Care Act is gradually reducing the amount you pay while in the donut hole. By 2020, there will no longer be a donut hole – beneficiaries will simply pay 25 percent of their medication costs until they reach the catastrophic coverage level.