What is the Donut Hole?
Last Updated : 11/06/20194 min read
Summary: Medicare beneficiaries can get Medicare Part D prescription drug coverage through either a stand-alone Part D Prescription Drug Plan or a Medicare Advantage Prescription Drug plan. In either scenario, Medicare Part D coverage of prescription drugs follows four benefit phases:
the deductible, the initial coverage limit, the donut hole and catastrophic coverage.
Coverage before you reach the Medicare “donut hole,” or initial coverage limit
Deductible: Some prescription drug plans have a deductible phase. That means you will pay the full cost of your prescription drugs until you have met your Medicare Part D or Medicare Advantage Prescription Drug plan’s deductible for that calendar year.
Initial coverage phase: In this phase of your Medicare Part D coverage, you pay a copayment or coinsurance for each covered drug. The specific amount of the copayment or coinsurance is usually based on the tier (or level) of your prescription drugs. The lower tiers are usually less expensive (and may include cheaper generic prescription drugs). Once the total yearly drug costs, including what you pay and what your Medicare Prescription Drug Plan or Medicare Advantage Prescription Drug plan pays, reach a specified amount ($4,020 in 2020), you will exceed the initial coverage limit.
Then, if you spend more, you move into the coverage gap phase, also known as the “donut hole.” Not all plans have a coverage gap or donut hole. The coverage gap is officially closed as of 2020. However, if you and your plan spend beyond the initial coverage limit, your costs for covered medications may change.
Coverage after you exceed the initial coverage limit
As mentioned above, the coverage gap doesn’t start until after you and your plan have spent a combined $4,020 in 2020. During this phase, you may have limited coverage for your covered prescription drugs. In 2020, you will generally pay 25% of the plan’s costs for all your covered prescription drugs until your yearly out-of-pocket drug costs reach $ 6,350. The percentages and amounts needed to reach the coverage gap may vary from year to year. If you reach the yearly out-of-pocket drug cost limit for the year, you will move into the next phase, called catastrophic coverage.
For more details about your costs in the Medicare coverage gap, also known as the “donut hole,” please see Medicare.gov.
Coverage beyond the Medicare out-of-pocket threshold
Catastrophic coverage: If and when you’ve paid $ 6,350 in out-of-pocket drug expenses in 2020, you’ve reached the out-of-pocket threshold. At this point, you only have to pay a small copayment or coinsurance for covered prescription drugs until the end of the year. Some beneficiaries won’t spend $6,350 in out-of-pocket drug expenses, so they may never reach the catastrophic coverage phase this year.
Limitations on coverage during the coverage gap
Important: This cost and coverage information only applies to medications included in the formulary (or prescription drug list) for the Medicare Part D Prescription Drug Plan or Medicare Advantage Prescription Drug plan you have. If your medication is not listed in your plan’s formulary, it will generally not be covered at all unless you can get a formulary exception. Also, keep in mind that formularies may change at any time; your Medicare plan will notify you if necessary. It’s a good idea to research all available Medicare prescription drug coverage options before enrolling in or switching plans to make sure you can get coverage for all your medications.
Again, not every beneficiary will exceed the initial coverage limit, and those who do may be able to find a Medicare plan with prescription drug benefits that offers more coverage during the coverage gap phase.
If you’d like to take a look at Medicare prescription drug plan options available through eHealth on your own, use the Compare Plans buttons on this page.