All insurance companies offering Medicare
Prescription Drug Plans must provide
at least one plan which offers the government's MINIMUM standard
benefits. They may, and most do, offer more comprehensive or
"enhanced" coverage as a second plan offering.
STANDARD BENEFITS & LIMITS
Medicare sets the standard benefits and limits for each calendar year.
Deductible - each
year the maximum deductible is indexed and no plan may exceed that
Deductible but may elect to not charge a Deductible.
Initial Coverage Limit
- each year ICL is set by Medicare and applies to all drug
plans whether stand-alone plan or plans contained within Medicare
Advantage Plans. Between the Deductible or $0.0 if the plan
does not have a Deductible, plans must pay at least 75% of
the medication costs. Note that the ICL is
the TOTAL cost of drugs, the plan's share
AND the beneficiary's share. Few
plans actually pay a flat 75%. Most have varying co-pays for
generic, preferred brand name and non-preferred brand name drugs.
Limit (CCL) - each year Medicare sets the CCL. Between the
ICL and the CCL is the Gap or Doughnut Hole.
The CCL is reached when the beneficiary's TRue Out
Of Pocket (TROOP) costs equal the CCL. TROOP
costs are defined by Medicare as the co-pays and deductibles.
TROOP does NOT include plan
Calculation - an individual beneficiary's Gap costs are
NOT calculated by subtracting
the ICL from the CCL because the ICL is
TOTAL drug costs. To determine the
total cost of the Gap, total TROOP costs up to but not
exceeding the ICL are subtracted from the CCL.
Formulary - a list
of medications for an individual Medicare Prescription Drug Plan.
Plans need only cover, pay benefits for, medications listed in their
Formulary. However, Medicare mandates that any plan wishing
to participate in the program must include certain medications in
their Formulary. Among the required medications are those for
the treatment of cancer, stroke and certain other significant
An example of calculating you
doughnut hole. Assume that there
is a plan that does not charge a Deductible and actually pays 75%
of drug costs up to ICL and that Medicare has set the ICL
at $2,500 and the CCL at $4,000.
CCL $4,000 - (ICL
$2,500 X 25% or $625) = $3,375
The beneficiary in this
fictitious example would have a Doughnut Hole $3,375 deep! After
this beneficiary paid $3,375 for her deductible and co-pays, she would
have reached the CCL and would only pay 5%, sometimes less, for
medications on the plan's Formulary.
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