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The sky is falling…..not
July 31, 2015
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Don’t get stuck
August 24, 2015

Be Wise

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QUESTION:  Why has the cost of my prescription drugs gone up so much?

ANSWER:  One reason is that you MAY have gone into the coverage gap (aka the “Donut Hole”).  When you have a Medicare Advantage plan or a stand alone Prescription Drug plan, there are 4 stages of your coverage.  The first phase is

1.  Yearly deductible stage.  Everyone starts in this stage usually January 1 or the date that your plan became effective.  This is the stage where you will pay a deductible if your plan has one.

2.  Initial Coverage stage.  In this stage you pay a copay for your prescription drugs depending on which tier they are covered by your plan’s formulary.  You should have received a copy of your plan’s formulary and you can look up each of the meds that you are on.  They will be in tier 1 -5.

3.  Coverage gap stage.  Not everyone will enter this stage.  The trigger is when you AND your plan have spent $2960 for your meds, you enter the gap.  Some plans cover some drugs in the gap meaning that IF your drugs are covered in the gap, you will continue to pay the same copay that you have been paying in stage 2.  For the majority of drugs you will pay 45% of the plan’s cost for the covered brand name drugs and 65% of the plan’s cost for covered generic drugs until your true out of pocket (TROOP) reaches $4700.  TROOP is calculated differently from the $2960 figure used to enter the gap.  As I mentioned before the $2960 is what you and your plan have paid for your meds.  TROOP includes what you have paid for your meds plus any deductible you may have paid plus the discount the pharmaceutical company has paid.  TROOP does NOT include what your plan has paid nor does it include any monthly premium that you may have paid.

4.  Catastrophic coverage.  Once your TROOP has reached $4700 you have entered the catastrophic stage.  At this point the cost of your meds goes down.  You will pay either 5% of the cost or $2.65 for generic and $6.60 for all other drugs whichever is greater.  If you enter the catastrophic stage you will remain in this stage for the remainder of the year.  The following January 1 the plan will reset to stage 1.

EXAMPLE:  John Smith has a Medicare Advantage plan that includes prescription drug coverage with XYZ Insurance.  He has a $320 deductible and is on several drugs.  John turned 65 on April 15 and his plan effective date was April 1.  John goes to fill his prescriptions on April 2 and he has to pay his $320 deductible.  After his deductible is met he will pay the copay due for each of his meds.  The total cost of his drugs is $500 of which he pays a $100 copay each month.  In October he will probably reach the coverage gap.  $500 x 6 months = $3000.  Of this $3000 he has actually paid $600 ($100 copay a month for 6 months) and his plan has paid $2400.  He reached the coverage gap when the total of what he paid plus what his plan paid reached $2960.

Now that he is in the coverage gap the costs of his meds will increase to where he is paying 45% of the cost of brand name drugs and 65% of the cost of generic.  Lets say that of the $500 total cost per month for his drugs, $300 is for brand name and $200 is for generic.  He will now pay $135 for his brand name drugs ($300 x 45%=$135) and $130 for his generics ($200 x 65%=$130) for a monthly total of $265 ($135+$130=$265).  His TROOP will be $1920 by the end of December so he will not go into catastrophic coverage.  The $1920 is $320 (his deductible) + $600 (what he paid for his drugs during his stage 2) + $530 (his cost for 2 months of meds at $265 each month) + $470 (the amount the pharmaceutical manufacturer discounted his drugs).

 

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