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Choosing A Prescription Drug Plan
Is "Doughnut Hole" Coverage Worth the Extra Cost? By Mary Johnson Last month, readers of this newsletter learned about my experience helping my friend Irene find drug coverage, (see "Part D Enrollment: A Stunningly Complicated Ordeal" in the January 2006 issue). Irene narrowed her choices down to a drug plan that had a $32.09 per month premium, a $250 deductible, co-pays of $4 per generic and $17 per preferred brand name drugs. We also evaluated a second option that provided some doughnut hole coverage, having a monthly premium of $87, no deductible and the same $4 generic and $17 preferred brand name drug co-pays. To evaluate the value of the extra coverage, you need to learn what the full cost of your drugs will be under the plan (not just your co-pays) and how close you are to falling into the "doughnut hole." I was able to get Irene’s drug cost information using calculators on the drug plan web site. You could also call the insurer to get this information. The drugs Irene currently uses came to $1,431 a year, barring cost changes. That meant she had $819 in coverage left for 2006 before she would reach the hole ($2,250 - $1,431). The doughnut hole coverage was not very generous. It would pay only 20% of drug costs or a total of $570 (20% of $2,850). Irene would pay the other 80% ($2,280). Here’s the math:
Without doughnut hole coverage With doughnut hole coverage Premiums $32.09 X 12 = $385.08 $87 X 12 = $1,044 Deductible $250 Deductible $0 Co-pays $399.92 Co-pays $399.92 Total costs $1,035 Total costs $1,443.92 Thus the doughnut hole coverage adds $408.92 to Irene’s premium costs. Yet it would only cover an additional $570 in drug costs. Thus, Irene’s net savings would only be $161.08 ($570 -$408.92) and only if she uses the additional coverage. Because Irene is not close to the doughnut hole, is in good health, and gets plenty of regular outdoor exercise in her vegetable garden, she decided to save the premium and pass up the extra coverage. If, however, you have high drug costs that send you sliding into the doughnut hole, take a look at plans that offer the extra coverage, but carefully evaluate those costs. Look for the plan that offers you the most generous coverage for the additional you have to pay. February 2006 | ||||||||||||
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