Most Medicare drug plans have a coverage gap (also called the “donut hole”). This means there’s a temporary limit on how much of the cost the drug plan will cover for drugs.
The coverage gap begins after you and your drug plan have spent a certain amount for covered drugs. In 2019, once you and your plan have spent $3,820 on covered drugs, you’re in the coverage gap. The amount you and your plan have spent on your prescriptions can be described as the total retail cost of the drugs. This total retail cost amounting in $3,820 is called the Initial Coverage Limit, and it’s important to note that this amount may change each year.
Not everyone enters the “Donut Hole”. Furthermore, people with Medicare who get Extra Help paying Part D costs won’t enter the coverage gap.
For those who don’t get Extra Help, you will need to know the rules for the “Donut Hole” in case you find yourself in it at some point:
- If your plan has a deductible, then you will be responsible for satisfying that deductible first and foremost.
- Once the deductible is reached, or if you don’t have one, then you will pay the copays as decided by your plan for covered medications.
- Once the total retail cost for your medications (what you pay + what the plan pays) reaches $3,820, then you will have entered the “Donut Hole”. When in the “Donut Hole” you will pay 25% for all brand-name medications and 37% of the cost for all generics.
- In order to exit the “Donut Hole”, an amount of $5,100 in total out-of-pocket drug costs will need to be spent and then you will enter the Catastrophic Phase. At this point, you will pay the greater amount of $3.40 for generics and $8.50 for brand-name drugs OR a 5% co-insurance.
Many of you won’t ever reach the “Donut Hole”. Most likely, the medications prescribed to you will be considered generic, which will keep costs low. Statistically, you probably won’t enter the donut hole. According to a study, only around 12% of all Medicare patients enter the “Donut Hole” each year, and only around 3% will enter the Catastrophic Phase. Consider the following if you’re evaluating the likelihood that you are a part of the 12%: the average tier 3 drug can easily cost around $300 per month retail. This means that in one year you will have accumulated $3,600 in total retail drug costs from this prescription alone, and now would only be a couple hundred dollars away from the $3,820 Initial Coverage Limit.
If you have a chronic condition, such as diabetes, you will be more likely to enter the “Donut Hole” as approximately 37% of all diabetics on Medicare enter the coverage gap. This is because if you are on insulin, you will most likely have prescriptions within tier 3 or another specialty tier.
Some Medicare Advantage and Prescription Drug Plans offer coverage for certain medications through the “Donut Hole”, however if coverage is offered it’s often only for generics. Some C-SNP Medicare Advantage plans will offer coverage for select medications through the “Donut Hole” as well. For example, in many counties there is a health plan that offers coverage to lower or eliminate your copay for insulin when in the “Donut Hole”. This could be a life saver for those who depend on their insulin, and could potentially keep you out of the hospital. For this reason, it’s recommended to explore your options. We can help you do the research and ensure you are covered for what you need most.