Medicare Donut Hole
Medicare

What You Need to Know About Medicare Donut Hole?

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What Is The Medicare Donut Hole?

The Medicare donut hole refers to the coverage gap phase in Part D coverage after your initial coverage period. Medicare Part D covers prescription drugs. 

You slide into this donut hole when the total costs of your drugs (i.e. what you and your plan have paid) reaches a preset limit. The 2021 limit is $4,130 but bear in mind the limit will change annually. During the time you are in this donut hole gap, you have to pay for part of your drug costs.

Understanding Medicare Donut Hole Coverage

It may sound like a treat to have with coffee, but the Medicare donut hole is not exactly sweet. In fact, Medicare donut hole coverage—and being stuck in it—can be incredibly frustrating, but we’re going to make getting a handle on this pesky coverage gap as painless as possible. 

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How Much Am I Responsible for During the Medicare Donut Hole?

You will be responsible for 25% of your drug costs while in the donut hole. It used to be more, but in 2020, a limit was set and now you won’t have to pay an excess of 25%. 

This doesn’t mean you won’t have to pay more for your prescription drugs than you did during your initial coverage, however. 

Let’s look at this example: If, during your initial coverage, your $200 drugs total cost came with a 20%, $40 copay, then, during the Medicare donut hole, you will have to pay 25%, $50 out-of-pocket.

Why Does the Medicare Donut Hole Even Exist?

Excellent question. The Medicare donut hole was created to encourage people to use generic drugs to keep payout costs low and reduce Medicare expenses at the program level. 

How Do I Get Out Of The Medicare Donut Hole?

To get out of the Medicare donut hole, you have to spend $6,550 in out-of-pocket costs. This total is what you pay for drugs that are covered and some of the costs paid by others. 

Once you’re out of the donut hole in Part D, you enter catastrophic coverage, which is when you will start to pay drastically lower coinsurance and copays for the rest of the year. As it stands, catastrophic coverage will pay 5% of the costs of each prescription drug, or $9.20 for brand name drugs or $3.70 for generic options—whichever is more. 

So, with this in mind, let’s look at the costs that will help you get out of the Medicare donut hole and into catastrophic pay. These costs include:

Your deductible
What you paid during the initial coverage period
Close to the total cost of brand-name drugs (which includes the manufacturer’s discount) bought while in the donut hole
Costs paid by others (e.g. by family members, charities, and other persons for you)
Costs paid by AIDS Drug Assistance Programs, State Pharmaceutical Assistance Programs (SPAPs), and the Indian Health Service.

Of course, there are costs that won’t help you slide into that coveted catastrophic coverage level. These costs include:

Your monthly premiums
The amount your plan pays toward the cost of your drugs
The cost of drugs that are not covered under your plan
The cost of drugs that ARE covered by your plan but you got from a pharmacy outside your plan's network
The 75% generic discount

The good news is you don’t have to account for this tally: your Part D plan will do it for you and issue a monthly statement for you to track. 

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Is Anyone Exempt from the Medicare Donut Hole?

If you qualify for Extra Help (the federal program that pays for some or most of Part D coverage, also known as Part D Low-Income Subsidy), you won’t have to go through the Medicare donut hole and your drug costs throughout the year will be different from people with standard Part D plans.

How to Make the Medicare Donut Hole More Affordable?

There are a few ways you can cushion the financial strain of the donut hole, even if you can’t avoid it. 

State Pharmaceutical Assistance Programs (SPAPs): While not all states have these programs, if yours does, they’re a great way to get help paying for your medication. Some SPAPs will contribute money toward your Part D premium or, alternatively, they may help to offset prescription costs. Regardless, SPAPs are definitely worth looking into.

Patient Assistance Programs: Many brand-name drug manufacturers will offer these programs for people who qualify, based on income and the amount they spend on a brand-name prescription. Patient assistance programs will pay for all or some of the costs. Check with the drug provider to see if you qualify.

Best Price: Get this: sometimes, prescription drugs will be less if you don’t use your insurance. By asking your pharmacist for the “best price”, you may be able to pay significantly less for your medication. This said, you need to keep in mind that a drug you buy outside of your insurance may not count toward your deductible and it may not count toward getting you out of the donut hole. Speak to your insurance provider to get a handle on their out-of-plan medication policies. 

Generics: Talk with your doctor to see if a medication you use can be swapped out with its less expensive generic equivalent. 

You can’t always avoid the Medicare donut hole—especially if you rely on medications—but you can definitely make this gap in coverage easier to endure. It starts with finding the best provider of Medicare Part D insurance for you. 

We can help! Request a free quote for Plan D insurance and get the best Medicare donut hole coverage options for you. 

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Questions?
No, if you have Part D coverage but spent less than the annual limit, you won’t enter the donut hole. Also, if you are part of the Extra Help program, you’ll be exempt from the Medicare donut hole.
Spend the required amount in out-of-pocket expenses and then you will enter catastrophic coverage, which is much more affordable.
People who are on the Extra Help program do not enter the coverage gap of the Medicare donut hole.

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