How to Avoid the Medicare Prescription Drug Coverage Gap, or “Donut Hole”

Pamela Cannaday by Pamela Cannaday | Licensed since 2011

This article was updated on: 09/15/2018

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Most Medicare Part D stand-alone and Medicare Advantage prescription drug plans include a coverage gap in Part D benefits, also known as the Medicare “donut hole.” During this gap in prescription drug coverage, beneficiaries may have to pay a larger portion of their prescription drug costs until they reach the catastrophic coverage phase of their plan.

What is the Medicare coverage gap, or “donut hole”?

The Medicare coverage gap, or “donut hole,” is a temporary limit on what drug plans will pay for eligible medications.

Each year, Medicare Part D beneficiaries may enter the prescription drug coverage gap if they and their drug plan have paid a specified amount on covered drugs.

Once in the Medicare coverage gap, beneficiaries must pay a percentage of their drug cost. Because of provisions in the Affordable Care Act, beneficiaries will pay a lower percentage toward their drugs while in the coverage gap each year, until the year 2020, when it is estimated that beneficiaries will pay only 25% of their drug costs after reaching the coverage gap.

The coverage gap ends when a beneficiary’s out-of-pocket expenses for medications on the plan’s formulary reaches a certain threshold, which may change each year.  At this point, the beneficiary enters the catastrophic coverage phase. (Please note that any money spent on drugs not included in the plan’s formulary will not count towards this threshold total.) Once the beneficiary reaches the catastrophic coverage phase of a Medicare Part D stand-alone or Medicare Advantage prescription drug plan, he or she is only responsible for a small coinsurance or copayment on covered medications for the rest of the calendar year.

Can you avoid the Medicare coverage gap?

Not everyone will enter the Medicare coverage gap, or “donut hole,” each year. For example, Medicare beneficiaries who get Extra Help paying for Part D costs won’t enter this coverage gap. Additionally, as a result of the Affordable Care Act, the coverage gap is slowly being closed up and phased out over time.

However, for those still concerned, there are ways to help you avoid reaching the coverage gap each year:

  • Ask local pharmacies if they offer drugs you take at a reduced cost.
  • Check to see if using a mail-order pharmacy for a three-month supply of drugs may lower your copayments.
  • Ask your doctor if your medications have lower-cost generic options.
  • Always use a preferred pharmacy if your prescription drug plan has one.
  • Get assistance from private, state, or federal programs that help with drug costs.
  • Some drug manufacturers also offer assistance programs for their own drugs.

Don’t let the Medicare Part D coverage gap alarm you too much; a prescription drug plan can still save you money on your medications.

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