What is the Donut Hole?

Most Medicare Prescription Drug Plans have a coverage gap – also referred to as the (dreaded) "donut hole".  It is a stage of drug coverage where the Part D plans put a temporary limit on what they will cover for medications, based on total drug expenditures.

Not Everyone Goes Into the Gap

The coverage gap begins after you and your drug plan have spent a certain amount for covered drugs. Items that count are your yearly deductible, coinsurance and copayments.

In 2015, once you and your plan have spent $2,960 on covered drugs - you're in the coverage gap.

In 2016, once you and your plan have spent $3,310 on covered drugs, you're in the coverage gap.

This amount will change each year, as legislation passed with the Affordable Care Act will actually phase out the donut hole by the year 2020.

What Happens in the Gap?

The biggest thing you will see in the donut-hole phase of coverage is you will pay a lot more for your prescription drugs. 

You will pay:

• 45% of the cost of brand-name medications

• 58% of the cost of generic drugs

When Do I Get out of the Donut Hole?

You will be in this stage of coverage until you and your plan has paid total out-of- pocket costs of $4850.  Once this is met, you enter the last coverage phase – the Catastrophic Phase. 

Amounts paid for medications in the Catastrophic Phase are very minimal, and you continue in this stage for the rest of the year.

Nursing Home Stays...Am I Covered?

One of the the biggest misconceptions that people on Medicare or who are close to going on Medicare have is in regards to Nursing Home coverage.

Medicare does not provide coverage for the majority of nursing home stays, and when they do, there are very specific rules for services they will cover.

Medicare should pay for skilled nursing facility (SNF) care if:

·         The patient was hospitalized (as an in-patient, not on observation status) for at least three days and was admitted to the SNF within 30 days of hospital discharge.

·         The beneficiary requires skilled nursing or skilled rehabilitation services, or both, on a daily basis.  Skilled nursing and skilled rehabilitation services are those which require the skills of technical or professional personnel such as nurses, physical therapists, and occupational therapists.  In order to be deemed skilled, the service must be so inherently complex that it can be safely and effectively performed only by, or under the supervision of, professional or technical personnel.

·         The skilled nursing facility is a Medicare certified facility.

Medicare’s coverage if those guidelines are met:  (2015 amounts)

·         Days 1-20:  $0 copayment

·         Days 21-100:  $157.50 per day copayment

·         Days 100+:  Patient is responsible for 100% of the costs

Medicare supplements (Medigap); will cover the patient’s deductibles and coinsurance costs up to day 100; so long as the above Medicare guidelines are met.

I get several calls a year from caregivers who tell me that their parent is unable to stay at home because of their ability to care for themselves in terms of eating, remembering to take medicines, toileting, and bathing; and want to know what their options are.  Unfortunately, this level of care is called ‘custodial,’ and nursing home stays for custodial care alone is not covered by Medicare.

There are plans designed to help pay for long term care in nursing homes; however, as with any insurance, you are paying for a service that you hope to not ever have to use, and these plans tend to be almost prohibitively expensive.

There are also plans available designed to help cover short term stays in a skilled nursing and assisted living facilities.  These medically underwritten plans have very few restrictions on what is covered; and cover nursing home stays that are usually for a year or less.  Recent research states that 80% of all nursing home stays are for less than one year!  These short-term plans are generally very affordable plans for the coverage received, and the potential benefits far outweigh the modest monthly premium costs.

I have seen entire life-savings wiped out in a one years’ stay at a nursing home.  My first advice to individuals and couples who are worried about protecting their wealth is to consult an elder care attorney who deals with this every day. 

My second piece of advice is to take a look into short-term care plans as an alternative to long term care insurance with a reputable Medicare insurance agent.  If you don’t have one of your own, I’m here to help.