A few years ago, we (personally) found ourselves approaching Medicare age, with a combination of trepidation and relief. To be fair, in terms of medical insurance, we have had an overall positive experience with Medicare. Originally, Medicare excluded coverage for prescription medicines. This changed under President George W. Bush, when Medicare Part “D” (Prescription Drug Coverage) was implemented in 2006. From the start, Part D was optional, and remains that way. As an alternative to Part D, enrollees may purchase drug coverage through a private Prescription Drug Policy, or they can go it alone.
I should also mention that for Medicare enrollees electing to use Part C (Medicare Advantage), which places all coverages outside traditional Medicare, many Advantage Plans include drug coverage. That is a topic for another time.
One of the Original Sins of Part D is “affectionately” called the “Donut Hole.” This is stage 3 of annual coverage, with Stage 1 being the deductible, which must be met before Stage 2 benefits are paid using traditional cost sharing between Medicare and the enrollee. Stage 3 is the Donut Hole, wherein the consumer pays a larger portion of each prescription until reaching Stage 4, the Catastrophic Coverage period, where the policyholder no longer pays any portion of prescription costs. Every January 1, the policy resets back to Stage 1.
For years, politicians have been promising to close the Donut Hole, staying with co-payments until the Catastrophic Coverage period. At last, come 2025, the Donut Hole is going the way of the Dodo Bird. Since its elimination is costly, there will be compromises. First is a higher deductible, which must be met before the Plan really kicks in. The maximum Deductible in 2025 will be $590.
Once the Deductible is satisfied, enrollees will pay shared costs for covered prescriptions until they have spent $2,000 out of pocket. Covered prescriptions after that point are secured at no out-of-pocket cost for the balance of the year.
People approaching age 65, when Medicare eligibility begins, but still working for an employer that offers health insurance benefits, need to know the new rules. Normally, Americans sign up for Medicare for their 65th birthday month, and failure to do so can result in penalties. An exception is made for employees with Qualified Coverage.
Qualified Coverage is determined by Medicare, based on the terms of the employer-sponsored Plan. For most private insurance that is not a problem. However, with upcoming changes to Medicare Part D, employees should take a new look at their employer’s drug coverage. A thorough review is required of each employer offering Drug Coverage to determine if Qualification will still be granted. Failure to re-qualify may subject employees turning 65 to Medicare penalties. If you are in doubt, contact your Benefits Manager.
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