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The Truth About the Medicare Part D Donut Hole
By Steven Chapman and Gregg Chapman, Esq.

The Donut Hole associated with Medicare Part D prescription medications has not been eliminated and there are no plans for it to disappear anytime in the future. This may come as a surprise to many who have seen the following headlines on the internet. The truth is there will be a gradual decrease in Donut Hole costs until 2020 at which time it will remain as a 25% coinsurance charge to Medicare beneficiaries. There will continue to be significant Medicare Part D costs to the applicant who has high prescription medication expenses and is settling their workers’ compensation claim. The Part D deductibles, coinsurance and Donut Hole costs cannot be paid out of the Medicare Set-Aside.

The Donut Hole associated with Medicare Part D prescription medications has not been eliminated and there are no plans for it to disappear anytime in the future. This may come as a surprise to many who have seen the following headlines on the Internet: “Closing the Medicare Part D Doughnut Hole: The End Is in Sight”; “Prescription donut hole closing for many on Medicare”; “Health care bill will gobble up donut hole—eventually.” The truth is there will be a gradual decrease in Donut Hole costs until 2020 at which time it will remain as a 25% coinsurance charge to Medicare beneficiaries.

There are four parts to the standard Medicare Part D Plan:
• Annual Deductible paid by Medicare beneficiary: $325 in 2013 (was $250 in 2006)
• Initial Coverage Limit: 25% Coinsurance paid by the Medicare beneficiary $326 - $2,970 in 2013 (was $251 - $2,250 in 2006)
• Donut Hole aka Coverage Gap paid by Medicare beneficiary: $2,971 - $6,733.25 (was $2,250 - $5,100 in 2006)
• Catastrophic Coverage: 5% paid by Medicare beneficiary after $6,733.25 in 2013 (was $5,100 in 2006)

The Affordable Care Act aka Obamacare includes a plan to eventually reduce the Donut Hole from a 100% cost to the Medicare beneficiary to a 25% cost by 2020. However, it does not include any freeze on the other parts of Medicare Part D. As illustrated above, there have been significant increases in the deductible and the dollar limits since the plan went into effect in 2006. No one knows what these amounts will be in 2020 and beyond, but one could speculate that the amounts saved by the reduction in the Donut Hole might be offset by an increase in the other portions of the plan.

There will continue to be significant Medicare Part D costs to the applicant who has high prescription medication expenses and is settling their workers’ compensation claim. The Part D deductibles, coinsurance and Donut Hole costs cannot be paid out of the Medicare Set-Aside. Thus, these Non-Medicare drugs costs should be accounted for in the settlement negotiations. Your structured settlement broker can break down these costs for you.

It is anyone’s guess as to why the misleading information about the elimination of the Donut Hole has been spread in articles and in the media. Some say it is a play on words and that the term “closing the Donut Hole” sounded better when trying to sell the Affordable Care Act. Whatever the reason, an eventual reduction in the coverage gap to 25% is not the same as a $0.00 cost to a Medicare beneficiary that is implied in the word: “CLOSED”

Steven F. Chapman & Gregg Chapman, Esq
National Settlement Consultants
12039 Jefferson Blvd.
Culver City, CA 90230
Phone: 800-845-2969
Fax: 310-450-3132
Cell: 310-480-5742
Email: SettleMan@aol.com or greggchap@aol.com

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