What is the Donut Hole?
This article was updated on: 09/16/2018
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 the Medicare donut hole
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 limit: 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 drugs. The lower tiers are usually less expensive (and may include cheaper generic 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 ($3,750 in 2018), you will move into the coverage gap phase, also known as the “donut hole.” Not all plans have a coverage gap or donut hole.
Coverage gap, also known as the “donut hole”
As mentioned above, this coverage phase doesn’t start unless your plan includes a coverage gap, and until you and your plan have spent a combined $3,750 in 2018. During this phase, you have limited coverage for your covered drugs. In 2018, you will generally pay 35% of the plan’s costs for name-brand drugs and 44% of the plan’s costs for generics until your yearly out-of-pocket drug costs reach $5,000. The percentages and amounts needed to reach the donut hole may vary from year to year. Once you have reached the yearly out-of-pocket drug cost limit for the year in the donut hole, 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 donut hole
Catastrophic coverage: If and when you’ve paid $5,000 in out-of-pocket drug expenses for 2018, you only have to pay a small copayment or coinsurance for covered drugs until the end of the year. Some beneficiaries won’t spend $5,000 in out-of-pocket drug expenses, so they may never reach the catastrophic coverage phase this year.
Limitations on coverage with the donut hole
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 reach the coverage gap, and those who do can possibly find a Medicare plan with prescription drug benefits that offers more coverage during the donut hole.
Need more help understanding the Medicare donut hole?
I can tell you more about Medicare prescription drug coverage and other Medicare plan options we offer. Or, use one of the links below to request a phone conversation or an email with personalized information for you. If you prefer to take a look at Medicare plan options available through eHealth that cover prescription drugs on your own, use the Compare Plans buttons on this page.