Countdown to Medicare with Type 1 Diabetes: 8 Months / Drugs and Donuts

Laddie_Head SquareWhen you start investigating Medicare plans, it is easy to get overwhelmed with letters and options. Parts A, B, C, and D are well-known, but depending on where you live, you may find Parts F, G, K, L, M, and N.

In this blogpost I plan to be simple and just talk about Part D Medicare prescription drug coverage. That’s a joke because there is nothing simple about Part D.

Let’s start with a few straightforward facts:

  • Part D is regulated by Medicare but all drug plans are administered by private companies.
  • Part D plans provide coverage for generic and name-brand drugs. All plans must Countdown to Medicare 8 Monthsprovide at least a Medicare-approved level of coverage, but can vary by specific drugs covered, rates, and pharmacy networks.
  • In order to purchase a Part D plan, you must be eligible for Medicare Part A and/or enrolled in Part B. You must also live in the plan’s service area.
  • You may purchase Part D as part of a Cost/Advantage plan or as a stand-alone Part D plan.
  • Part D coverage is not required. However, if you do not purchase it when you are first eligible, you may be subject to penalties and higher premiums when you do. Those penalties will continue for as long as you participate in Part D. Like for the rest of your life.

The most complicated part of standard Medicare drug coverage is understanding the four cost stages, particularly the coverage gap or donut hole.

The first stage is the Deductible Stage where you pay 100% of your prescription drug costs. The maximum deductible allowed by Medicare in 2016 is $360. Some plans have lower deductibles.

Once you satisfy your deductible (doesn’t take long if you have diabetes!), you enter the Initial Coverage Stage. In this “cost sharing” phase you pay either a copay or a percentage copayment depending on your drug plan. In 2016 this stage continues until the payments by you and your plan combined total $3310. For example, you buy 4 vials of Lantus with a total contracted price of $1000. You have a coinsurance plan where you pay 25% or $250 and the plan pays 75% or $750. The entire $1000, not just your out-of-pocket cost, counts towards the $3310 amount to put you into the Coverage Gap or Donut Hole.

If you use insulin, you can see how quickly you will enter the donut hole where the out-of-pocket drug costs increase significantly. In 2016 under a standard Medicare Part D plan, you can expect to pay 45% of the cost of covered name-brand drugs and 58% of the cost of generics once you reach the coverage gap. I could write a book trying to explain the donut hole, but here are a few things to put it in context.

The donut hole terminology came from the Medicare Modernization Act of 2003 (MMA) in which prescription drug coverage became available to all Medicare beneficiaries. If you are interested in the history of this law, check out this publication by Jonathan Blum who was a professional staff member to the Senate Finance Committee at that time.

As recently as 2010, most Medicare beneficiaries paid 100% of drug costs once they reached the coverage gap. One of the few changes made to Medicare by the Affordable Care Act was the implementation of a blueprint to gradually eliminate the donut hole by 2020. A good explanation of these changes can be found in this Medicare publication “Closing the Coverage Gap—Medicare Prescriptions are Becoming More Affordable.”

Part D Rectangle

One unanswered question I have about the coverage gap is how the $4850 to enter the catastrophic stage is computed. I have attended two Medicare information meetings and both insurance companies indicated that the $4850 is totally paid by me. However, the Medicare publication mentioned above states: “Although, you’ll only pay a certain percentage of the price for the brand-name drug, the entire price (including the discount the drug company pays) will count toward the amount you need to qualify for catastrophic coverage.” If you know the answer, please leave a comment. Once I get to Medicare, I suspect I’ll figure it out.

The last stage of Part D prescription drug coverage is the Catastrophic Coverage Stage. In 2016 you pay either $2.95 for generics and $7.40 for brand-name drugs or 5% of drug costs, whichever is greater.

Just when things look complicated enough, there is another consideration for those of us who use insulin pumps. Although insulin is usually purchased through a Part D plan, it is covered under Part B for pump users. Fine and dandy, but it can be extremely difficult to find a supplier for Part B insulin. To get a clue how difficult, read Sue from Pennsylvania’s post “Hey, He Needs his Insulin!” One reason is that many pharmacies rarely deal with this and plead ignorance. Another reason is that the reimbursement rate for Part B insulin is so low that pharmacies/suppliers lose money when selling Part B insulin. A 2013 Lincoln Journal Star article states:

A Medicare spokeswoman said the price is set in federal law — at 95 percent of the average, wholesale price in effect on Oct. 1, 2003. So it requires Congress to change it, she said in an email to the newspaper.“

The cost savings for buying insulin under Part B are substantial. Medicare pays 80% of the cost and a supplemental/advantage/cost plan should pay the remaining 20%. Insulin is therefore usually provided at no cost to someone using a pump. In addition, insulin under Part B is excluded from Part D donut hole calculations.

That’s it for today. I hope that this blogpost has provided some information without totally putting you to sleep. I have done my best to research Medicare drug coverage and if any of what I have written is incorrect, please send me a message along with a dozen donuts.

Most of us think that when we grow old, we will play golf, watch TV, do crossword puzzles, and relax on the patio. I am beginning to think that I’ll be sitting at my desk trying to figure out Medicare….

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Most of the information in this blogpost comes from current publications of Blue Cross Blue Shield of Minnesota and HealthPartners. I attended community meetings offered by those companies in July. The official Medicare website is also an excellent resource.

12 thoughts on “Countdown to Medicare with Type 1 Diabetes: 8 Months / Drugs and Donuts

  1. I’m not a numbers person, but I think this helped me understand my own insurance statement.

    Imagine if a guide, written by you, could accompany insurance and Medicare statements. People would be glad to read them! (For the good writing, if not for the $ forecast.)

    • Katy, you must be an expert with all of the insurance stuff that you deal with. I bet that we could find more interesting hobbies:-)

  2. My plan doesn’t have a deductible so I get to go straight to step 2. Once I hit the catastrophic coverage, they also pay 100% of all covered drugs. They also have an extra discount in the coverage gap that they pick up 5% of brand name drugs – I would pay 45% for brand name drugs and 58% of generic drugs.

    As far as the coverage gap stage, they say I stay there until my out-of-pocket costs hit the $4,850. They define out-of-pocket costs as:

    What you pay when you fill or refill a prescription for a covered Part D drug (this includes payments for your drugs, if any, that are made by family or friends.)

    Payments made for your drugs by any of the following programs or organizations: “Extra Help” from Medicare; Medicare’s Coverage Gap Discount Program; Indian Health Service; AIDS drug assistance programs; most charities; and most State Pharmaceutical Assistance Programs (SPAPs).

    • So what you are saying, Kelly, goes along with what the insurance companies were telling me if I understand you correctly.

  3. Gold star on your Medicare homework! You should consult with BCBS and help their diabetes patients to navigate the maze.

    • Although the BCBS rep I met with individually was very capable, he had never heard of pumpers buying their insulin through Part B. He did do his homework and later emailed me that my insulin would be at no cost to me under their plan.

  4. I have 13 prescriptions, but unless a change is made (more scripts) I won’t hit the donut hole this year. I use target pharmacy (name now changed) for my part b insulin and test strips. I am a t2 pumper with supplemental insurance , and have no copay on the part B.
    It SEEMS very complicated, but like everything else “D”, you get used to it.

    • The key for you, Lloyd, is that you are getting your insulin under Part B. If you had to buy it under Part D, you would hit the donut hole quite quickly. As long as I buy my insulin through Part B, I won’t get close to hitting the coverage gap unless something changes for me medically. And I hope it doesn’t!

  5. I am not quite there, but five years is a short time. You are doing a great service Laddie.

    I referred your blog to the TUDiabetes.org blog page for the week of August 1, 2016.

    • Thanks, Rick. Five years is a long time and everything may change by then. At least the donut hole will be gone, thanks to the Affordable Care Act.

  6. I have been pleasantly surprised with how well Medicare part B has worked out for me. Part D is a little over $30, but only covers about half the cost of my scrips (but it also sets limits on what they can charge). I have co-insurance. I have to go in for trigger finger surgery (my 6th), last time that cost ME $20, about 1% of the expense of the surgery.

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