Who Wants a Donut “Hole”?

It is very important when settling your client’s workers compensation claim that you take into consideration what will happen when your client’s Medicare Set-Aside funds are exhausted. Yes, Medicare will start paying for the costs for the work injury, but only if all the funds were spent according to Medicare’s strict guidelines. However, payment of your client’s medical bills is not 100%. Your client will be subject to co-payments for services and co-payments for medications, including the donut hole.

The Donut Hole – actually called the coverage gap – is one of the most talked about facets of the Medicare Part D program, and perhaps the most hated. Before 2011, people who fell into it had to pay 100 percent of the cost of their drugs out of pocket. Under the Affordable Care Act of 2010, the Obama administration succeeded in getting drug manufacturers to provide large discounts in the donut hole for brand name drugs and the government discounted generics. The discounts were to be gradually phased in over a ten-year period.

Medicare Part D plans can vary based on a person’s choice of plan and they pay a specified amount for their prescription drugs. Once they meet this deductible, their plan takes over the funding. However, when the plan has paid up to a specified limit, the person has reached the donut hole. Once they reach this point, a person has to start paying for their medications again until they reach another specified amount. After this, their plan takes over payment once again.

The issue with the donut hole is that many people stop taking their medications upon reaching the donut hole because they cannot afford to pay the high costs for the drugs until they cross the coverage gap. However, once your client crosses the donut hole, they reach “catastrophic coverage”. Once they reach this stage, they will have to pay the greater of 5% of the drug’s cost or minimum copay, whichever is higher.

For 2021, the donut hole begins when the total amount paid by the plan reaches $4,130.00, at which point your client will be responsible for 25% for the cost of both brand-name and generic medications. Catastrophic coverage begins when your client’s out of pocket costs reach $6,550.00.

In light of this potential cost, it is vital that when you negotiate a settlement for your client that you carefully evaluate the proposed settlement amount to ensure that there are sufficient funds to cover future co-payments. MSA Meds is here to help you navigate post settlement and to work with you to maximize the longevity of your client’s settlement funds.