Millions of Americans enrolled in Medicare's new prescription drug program might soon face sticker shock at the pharmacy, if they haven't already.
That's because after months of sharing the cost of drugs with insurance companies, these consumers will reach the point where they must pay the entire tab themselves. Once their out-of-pocket costs for the year reach a few thousand dollars, insurance will kick in again.
This coverage gap is known as the "doughnut hole." It was designed to limit the cost of the drug program.
"Some people are shocked," says Deane Beebe, a spokeswoman for Medicare Rights Center. "They think it's a mistake that they are charged the full price for their drugs." Not everyone will fall into the doughnut hole. Poor people are protected from it. Some people do not spend enough on drugs to reach the gap. Others pay a higher premium for plans that provide coverage in the doughnut hole.
Still, PricewaterhouseCoopers recently figured that 3.4 million people will fall into the gap this year. Also, the Institute for America's Future, a group advocating the gap's elimination, estimates that Sept. 22 is D-Day, when the average senior citizen enrolled in the drug program at the start of the year will hit the doughnut hole.
Those in the hole, or headed for it, can take steps to help them get through the gap. But those with disabilities or chronic illnesses who have already hit the gap may often struggle to keep up.
Charlotte Weston of Milford, Conn., says she fell into the gap about three months ago.
The 57-year-old said a heart attack and other health problems forced her to quit her job as an emergency room nurse more than a dozen years ago. She said she is ineligible for federal and state drug assistance programs.
She said she was paying $150 a month under the drug plan before the coverage gap. She now pays about $850. Her doctor helps out with free samples of one drug.
Weston lets other bills slide. She says her utilities were shut off one day last month until she paid the delinquent bill with her disability benefits.
"I'm just driving myself deeper and deeper in debt," Weston said. "You rob Peter to pay Paul and can never pay Peter back."
Many participants are unaware of the doughnut hole, experts say. Or, if they heard about the gap, they don't understand how it is calculated and are surprised when it hits.
Here is basically how it works:
The standard drug plan has a $250 deductible, the amount a beneficiary must pay before insurance kicks in. Thereafter, the insurer pays 75 percent of the drug bill and the consumer picks up the rest.
The consumer enters the doughnut hole once total drug expenditures reach $2,250. These include the deductible and money paid by the consumer and insurer. Premiums are not included.
This is where it can get confusing, experts said.
Consumers might know to the penny how much they shell out each month for drugs. But they do not always keep tabs on how much the insurer pays, and the amount can be significant. Before they know it, consumers can reach the $2,250 limit and be in the doughnut hole.
"Unless they have been keeping careful tabs on what their total drug expenditures have been so far in the year they probably will have sticker shock when they go to the pharmacy," said Tricia Neuman, a vice president with Kaiser Family Foundation. "Instead of paying $30 a month they could be asked to pay $130 a month."
Once in the hole, they must pick up the full cost of their drugs while still paying premiums.
They will climb out of the hole once their out-of-pocket costs for the year reach $3,600.
This includes deductibles, earlier co-payments and the cost of drugs during the coverage gap. Premiums, payments made by the insurer and purchases of drugs not covered by the plan do not count. This is different from the calculation to get into the hole.
Once consumers reach the $3,600 limit insurance kicks in again. But this time it covers 95 percent of the cost of drugs, protecting against catastrophic expenses.
The doughnut hole can occur each year, although dollar limits will change to reflect rising drug costs.Here are suggestions to help you through the hole:
-- First, check if you are eligible for assistance under the Extra Help program that assists with premiums, deductibles and co-payments. There is no doughnut hole with Extra Help.
About 3.2 million Americans are eligible but have not applied, said Scott Parkin, a spokesman for the National Council on Aging
Eligibility and how much assistance you receive depend on income and assets, Parkin said. Generally, income must be less than $14,700 for an individual to qualify, and $19,800 for a married couple.
Assets--which include savings and cash-value life insurance but not a home--cannot exceed $11,500 for an individual or $23,000 for a couple.
To find out if you're eligible or to apply, call the Social Security Administration at 800-772-1213, or go online at www.socialsecurity.gov. Or visit www.BenefitsCheckUpRx.org to see if you qualify for Extra Help and other federal, state and local assistance programs.
-- Different strategies apply, depending on your drug costs, says Steven Hahn, an AARP spokesman.
If you have very high drug costs and money to get through the gap, you don't want to prolong the time you spend in the doughnut hole. Instead, you will want to reach the $3,600 limit as soon as possible to get to the more generous coverage on the back end, Hahn said.
But if you're hitting the hole late in the year and don't expect to emerge from it, you will want to reduce drug expenses, he said.
Don't skip medication to save money, Hahn said; instead, ask your doctor about generics or less expensive alternatives that are equally effective as the brand-name drugs you take. Or ask your doctor for free samples.
-- Prepare for next year. The program's open enrollment begins in November. More insurers are expected to offer plans with coverage through the doughnut hole. Get ready to research a plan tailored to your needs.
Also, based on drug spending this year, you will have a better idea of how much you need to set aside each month to get through next year's gap, Hahn said.
Eileen Ambrose is a columnist for The Baltimore Sun, a Tribune Co. newspaper.Copyright © 2015, Los Angeles Times