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 Common Definitions in Medicare and Supplemental Insurance

The jargon around Medicare and insurance in general can feel very inaccessible to potential clients. One of the ways that agents can earn the trust of those clients as well as inform them and help them find coverage that works for them is to know the common definitions in Medicare and Supplemental insurance.

The following are some of the common Medicare-related terms that clients will need to know:

Annual Election Period (AEP):

This is the period of time during which people can enroll in, disenroll from, or change their Medicare Advantage, Supplemental plans or prescription drug plans. This is also the period of time in which beneficiaries can return to original Medicare. Choices made during this time period are effective January 1st of the following year.  The time period is October 15th to December 7th.

Coverage Gap or Donut Hole:

Not every beneficiary will reach this gap. However, the coverage gap for 2023 begins after the beneficiary and their drug plan have spent $4660 dollars on covered and approved medications. While in this coverage gap, members with higher prescription drug costs will  pay a higher percentage of the cost of their medicine.

Deductible:

This is the amount that beneficiaries will pay for benefits before the plan begins to pay for their benefits.  These include medical coverage, including services, prescriptions, and products.

Initial Coverage Election Period:

This is often referred to by its acronym, the ICEP. This is the period of time when a person who is eligible for Medicare can sign up to receive those benefits for the first time. It begins three months before the person’s birthday month, includes the birthday month, and ends three months after the birthday month. It is a seven month period.

Medicaid: It is easy to get confused between Medicare and Medicaid. Medicaid is a program that provides health-coverage for certain low-income people. Most often included are pregnant women, the elderly, and those with disabilities. It is funded jointly by federal and state money.

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Medicare Donut Hole 2023

The Medicare Donut Hole 2023 is also known as the Part D coverage gap. The coverage gap occurs after the initial coverage period, when the beneficiary’s total drug cost reaches a specified limit. For 2023, the limit is $4,660.00. This cost includes a combination of what the beneficiary AND the insurance carrier has paid, which is why so many seniors can fall into the donut hole. Once people are in the donut hole, or coverage gap, they are responsible for a percentage of the cost of their prescribed medication(s).

What happens when the donut hole is reached?

Although beneficiaries are responsible for a percentage of the cost of their medication while in the coverage gap, they typically pay no more than 25% of the cost of approved, brand-name prescription drugs. Some plans offer even lower costs while in the coverage gap. The discount applies to the beneficiary’s plan negotiated pricing that specific drug. Although members pay no more than 25% of the price for the brand-name drug, almost the full price of the drug will count as out-of-pocket costs. This helps get them out of the donut hole faster, because member costs count toward out-of-pocket maximum payments.

How do I get out of the donut hole?

Catastrophic coverage kicks in to cover the costs of medication once a beneficiary has spent $7,400 in out-of-pocket costs. This number includes what the beneficiary pays in covered medication(s) and some costs that are covered by family members, charities, or other persons on their behalf. During this period, beneficiaries will pay significantly lower copays or coinsurance for their approved drugs for the remainder of the year. These out-of-pocket costs that help them reach catastrophic coverage include:

• Their deductible

• What they paid during the initial coverage period

• Almost the full cost of brand-name drugs (including the manufacturer’s discount) purchased during the coverage gap

• Amounts paid by others, including family members, most charities, and other persons on their behalf

• Amounts paid by State Pharmaceutical Assistance Programs (SPAPs), AIDS Drug Assistance Programs, and the Indian Health Service

The Medicare Part D plan should keep track of how much money beneficiaries have spent out of pocket for covered drugs and their progression through coverage periods. This information should appear in monthly statements.

Note: Beneficiaries with Extra Help do not have a coverage gap. They pay different drug costs during the year. Drug costs may also be different for those enrolled in a SPAP.

Click here to learn more about Medicare Drug Pricing.

We always get a lot of questions on Medicare Part D.  Here are some commons questions that we hear and additonal information on part D.  If you have other questions, please email Ed Crowe at Edward@Croweandassociates.com

1.  Popular Summer Medicare Part D Coverage Questions

2.  More on your Medicare Part D Coverage and the 2012 Donut Hole

3.  Average Retail Drug Prices

1.  Popular Summer Medicare Part D Coverage Questions

Question:  As we travel around this summer, will we still have Medicare Part D prescription coverage outside of our home state? Read more

We always get a lot of questions on Medicare Part D.  Here are some commons questions that we hear and additonal information on part D.  If you have other questions, please email Ed Crowe at Edward@Croweandassociates.com

1.  Popular Summer Medicare Part D Coverage Questions

2.  More on your Medicare Part D Coverage and the 2012 Donut Hole

3.  Average Retail Drug Prices

1.  Popular Summer Medicare Part D Coverage Questions

 Question:  As we travel around this summer, will we still have Medicare Part D prescription coverage outside of our home state?

Yes.  You can use your Medicare Part D prescription drug plan at any of your plan’s network pharmacies, and most Part D plans include more than 50,000 pharmacies in their network.  If you are in a remote area of the country and are having trouble finding a network pharmacy, you can always telephone your Medicare Part D plan’s Member Services department and ask them to help you find the nearest pharmacy (the toll-free number is on the back of your Member ID card). 

Question:  If I purchase prescription drugs while outside of the United States, and bring them back with me, will my Medicare Part D plan reimburse me for these drugs if they are on my Part D plan’s formulary?

 Probably Not.  Although you can always ask your plan for more information, the Medicare Part D program does not anticipate coverage for medications purchased outside of the United States. 

Question:  We just moved from North Carolina to Florida and our Medicare Part D plan was cancelled because of our relocation.  Can we enroll back into our same plan now (in July) or do we have to wait until November/December?

 You can enroll now into a new Medicare plan.  Most people are not allowed to change Medicare Part D prescription drug plans outside of the annual Open Enrollment Period (or Annual Election Period) that runs from October 15 through December 7 of each year.  However, a Special Enrollment Period is available for people who move to a new Medicare plan service area during the plan year and allows people to join a new Medicare prescription drug plan or Medicare Advantage outside of the annual Open Enrollment Period.   

 Question:  I will turn 65 in September and will be eligible for Medicare.  When is the best time to join a Medicare prescription plan?

 It depends on when you need your Medicare prescription plan coverage to begin.  Initially, you have a seven (7) month window of time to join a Medicare Part D or Medicare Advantage plan.  So if you enroll in a Medicare Part D plan within the three (3) months before the month that you become eligible for Medicare (for example, the 3 months before you turn 65), your Medicare plan coverage will start on the first day of your birthday month (or Medicare eligibility month).  If you join a Medicare plan during your birthday (or eligibility) month, your prescription drug coverage will start on the first day of the next month.  Finally, if you join a Medicare plan during the three (3) months after your birthday (or eligibility) month, your drug coverage will start the first day of the month following the month when you enroll.

 Did you have a question that needs answered?  No problem, you can email Ed Crowe at Edward@Croweandassociates.com for answers.

2.  More on your Medicare Part D Coverage and the 2012 Donut Hole

 Question:  How do I find out how much more money I need to spend before I exit this year’s Donut Hole?

 The easiest way may be to check your monthly Explanation of Benefits letter.  Your Medicare Part D plan regularly sends you an Explanation of Benefits (EOB) statement detailing your Medicare plan coverage.  You will notice that the letter is separated into sections and in Section 2, you will find information on your current stage of coverage.  You will also see a box in Section 2 of your EOB letter that is entitled, “What happens next?”  In this box, your Medicare plan shows the details of how much more you will need to spend before moving into the next stage of your plan’s coverage. 

 So if you are in the Initial Coverage stage, the “What happens next” area will tell you exactly how far away you are from your Coverage Gap (or Donut Hole).  If you are in the Donut Hole, you will see how much more money you will need to spend before entering the Catastrophic Coverage portion of your Medicare Part D plan.   

Question:  I have already reached my Medicare drug plan’s initial coverage limit of $2,930 and entered the 2012 Donut Hole, so do I now pay the difference between the $4,700 out-of-pocket limit and my plan’s $2,930 initial coverage limit before exiting the Donut Hole?

 Not exactly.  You will stay in the 2012 Donut Hole until your total out-of-pocket costs exceeds the $4,700 threshold – less any name-brand drug discounts you receive while in the Donut Hole.  As a note, there are two different numbers that are used to define your Medicare drug plan’s Donut Hole or Coverage Gap: (1) The total negotiated retail value of your medications:  When the total value of the retail cost of your drug purchases exceeds $2,930, you go into the 2012 Donut Hole. (2) Total Out-of-Pocket Spending:  After your actual spending for covered medications has reached $4,700, you exit the Donut Hole.  (Remember, the brand-name discount counts toward meeting this total out-of-pocket spending amount).

 For example, if you are in your Medicare Part D plan’s Initial Coverage Phase, purchase a medication with a $100 retail cost, and only pay a $30 co-payment out of your own pocket (the plan pays the other $70), you get $30 credit toward the $4,700 Donut Hole exit point and $100 toward your $2,930 Initial Coverage Limit.

Now when you are in the Donut Hole and you buy the same $100 medication, and your plan does not have any Donut Hole coverage, you are responsible for the full $100 drug cost.  However, this year, you will get a 50% discount on all brand-name drugs bought in the Donut Hole, or a 14% discount on generic drugs purchased in the Donut Hole.

 If your $100 medication was a name-brand, then you will pay only $50 – but, you will get the full credit for the $100 purchase toward meeting your $4,700 out-of-pocket threshold or Donut Hole exit point.

 On the other hand, if the $100 medication was a generic drug, you would pay $86 dollars and get credit only for the actual $86 you spent toward meeting the $4,700 Donut Hole exit point or out-of-pocket threshold.

Question:  Will the Medicare Part D plan’s Coverage Gap or Donut Hole really ever go away?

 Yes, but only to the extent that you will still pay 25% in the Donut Hole.  As many people know, the Medicare Part D Donut Hole is scheduled to “close” in 2020.  But medications will not be free when the Donut Hole is finally “closed”.  In 2020, the co-insurance or cost-sharing for both generic and brand-name drugs purchased in the Donut Hole will be no more 25% of the plan’s negotiated retail price.  So, if your 2020 Medicare Part D plan follows the CMS standard Medicare Part D parameters with 25% co-insurance paid during the Initial Coverage Phase, you will pay no more in the Donut Hole than you would pay during normal coverage and the Donut Hole will be effectively eliminated.

 On the other hand, if your 2020 Medicare Part D plan has a $0 (or low) co-payment for your medications during the Initial Coverage phase, and then you find that you are paying 25% of your medication retail prices in the Donut Hole, it may not seem as though the Donut Hole is “closed,” although it technically is.  

3.  Average Retail Drug Prices

 Question:  What does the “negotiated” retail drug price mean and why is it important?

 The negotiated retail drug price is the amount that you would pay for your medication at a particular pharmacy when you have a Medicare Part D prescription drug plan.  The negotiated retail price for a certain medication may be different from the pharmacy’s regular price, and it can be different from pharmacy to pharmacy and from Medicare Part D plan to plan.

For example, if you purchase a formulary medication like Lipitor®, you may see on your receipt a negotiated retail price slightly more or slightly less than someone who is enrolled in another Medicare plan.  And, if you were to go to a different pharmacy using your same Medicare plan, the negotiated retail price could also be slightly different.

 The negotiated retail price is important to you because your total annual negotiated retail drug costs are used to determine the point when you enter into your plan’s Donut Hole phase.  So based on the differences in negotiated retail price between plans, you may meet someone using the same medications, but entering the Donut Hole a short-time before or after you.  Also, if you are in the Donut Hole, you will receive a discount on the negotiated retail price of your formulary medications.  So, based on the negotiated retail prices, people in different Medicare plans will pay different discounted prices in the Donut Hole.