Closing the Coverage Gap – The 2011 Affordable Care Act Made Easy

Closing the Coverage Gap – The 2011 Affordable Care Act Made Easy

What is the coverage gap, and how will a member know when they have reached it?

Some Medicare drug plans have a coverage gap. This means that after a member and the insurance carrier have spent $2,840 for covered drugs, the beneficiary will pay the full cost of prescription drugs (up to a limit of $4,550 in out-of-pocket costs for 2011).

Every month a prescription is filled, the insurance carrier mails an Explanation of Benefits (EOB) notice stating how much a member has spent on covered drugs and if/when the member has reached the coverage gap.

Who can receive the savings while in the coverage gap?

  • An Individual enrolled in a Medicare Prescription Drug Plan (including employer group health and waiver plans) or a Medicare Advantage Plan that includes prescription drug coverage
  • If an individual does not receive Extra Help (Low Income Subsidy)
  • The beneficiary has reached the coverage gap

How does the 50% coverage gap discount work for brand-name drugs?

Companies that make brand-name prescription drugs must sign agreements with Medicare to participate in the Medicare Coverage Gap Discount Program. This program requires the companies to offer discounts on brand-name drugs to people who have reached the coverage gap. Once a beneficiary has reached the coverage gap, they will automatically receive a 50% discount on brand-name prescription drugs at the time of purchase.

With this discount, they will only pay 50% of the price for the brand-name drug, but the entire price (including the 50% discount the drug company pays) will count toward the amount needed to qualify for catastrophic coverage. The EOB notice will show any discounts paid by the drug companies. The beneficiary will still need to pay any dispensing fee (cost to fill a prescription). The dispensing fee isn’t discounted; it is added to the discounted amount of your prescription.

Example: Mrs. Anderson reaches the coverage gap. She goes to her pharmacy to fill a prescription for a covered brand-name drug. The price for the drug is $60 and the dispensing fee is $2. Once the 50% discount is applied, the cost of the drug is $30. The $2 dispensing fee is added to the $30 discounted amount. Mrs. Anderson will pay $32 for the prescription, but the entire $62 will be counted as out-of-pocket spending and will help Mrs. Anderson get out of the coverage gap.

> Once the coverage gap is entered, will all Medicare-covered brand-name prescription drugs be discounted?

In 2011, manufacturers that produce over 99% of the brand-name drugs used by people with Medicare are participating in this program.

> How is coverage for generic drugs changing in the coverage gap?

In 2011, Medicare will begin by paying 7% of the price for generic drugs during the coverage gap and the beneficiary will pay the remaining 93% of that price. The coverage for generic drugs works differently than the 50% discount for brand-name drugs. For generic drugs, only the amount you pay will count toward getting you out of the coverage gap. Also, the dispensing fee is included as part of the cost of the drug.

Example: Mrs. Anderson reaches the coverage gap in her Medicare drug plan. She goes to her pharmacy to fill a prescription for a covered generic drug. The price for the drug is $20 and there is a $2 dispensing fee that gets added to the cost. Once the 7% coverage is applied to the $22, she will pay $20.46 for the covered generic drug. The $20.46 amount she pays will be counted as out-of-pocket spending to help her get out of the coverage gap.

What if an individual has coverage from a State Pharmacy Assistance Program (SPAP)?

If someone is enrolled in a State Pharmacy Assistance Program (SPAP), or any other program that provides coverage for Part D drugs (other than Extra Help), they will still get the 50% discount on covered brand-name drugs. The 50% discount is applied to the price of the drug before any SPAP or other coverage.

What if I a member is in a Pharmaceutical Patient Assistance Program?

Patient assistance programs offered by drug companies are different than the Medicare Coverage Gap Discount Program. The beneficiary can check with the drug company to find out if its assistance program will change.

Will a beneficiary receive additional savings once they have reached the coverage gap if the Medicare drug plan already includes coverage in the gap?

Yes – the individual may receive a discount after the plan’s coverage has been applied to the price of the drug.

What if the member already receives Extra Help from Medicare? Will they receive the discounts?

No. If someone receives Extra Help (LIS), they already have coverage for prescription drug costs during the coverage gap.

*Above information courtesy of Universal Healthcare.

Burman S. Clark

Burman S. Clark

Burman S. Clark, RHU, CSA is the President of Muneris Benefits and a licensed insurance broker and consultant. His independent practice and focuses on employee benefits, individual life, disability, medical, and senior products. Burman has traveled extensively and provided guidance to large employer associations with regards to the Affordable Care Act.