If you’re new to Medicare, you may have heard of something called the “donut hole”. The “donut hole” refers to the prescription drug coverage gap that every Part D plan has in which you will have limited or no prescription drug coverage.
What’s the Medicare Donut Hole?
The “Donut Hole” is Stage 3 of a Medicare Part D drug plan. This is the Coverage Gap where you will have limited or no prescription drug coverage. You will usually pay the most amount for your drugs while you are in the “Donut Hole.”
In order to hit the Coverage Gap, or “Donut Hole” the cost of your medications must exceed a specific dollar amount set every year by Medicare. In 2018 this amount is $3,750. The amount is calculated based on what both you and your insurance company have paid for your drugs.
Most never hit the Coverage Gap, but those that do, quickly understand that the dreaded “Donut Hole” is not good.
This means that after you and your Medicare Prescription Drug Plan have spent a certain amount of money for covered prescription drugs, you then have to pay all costs out-of-pocket for the drugs, up to a certain out-of-pocket limit. The yearly deductible, coinsurance, or copayments and what you pay while in the coverage gap, all count toward this out-of-pocket limit. The limit doesn’t include the plan’s premium.
There are Medicare Prescription Drug Plans that offer some coverage while you’re in coverage the gap; some plans provide coverage for generic drugs, for example. However, plans with gap coverage may charge a higher monthly premium. Check with the Prescription Drug Plan first to see if your medications would be covered during the coverage gap.
Once you reach the plan’s out-of-pocket limit during the coverage gap, “catastrophic coverage” automatically kicks in. Catastrophic coverage means that when you’ve spent up to the plan’s out-of-pocket limit for covered prescription drugs, you will only pay a small coinsurance amount or a copayment for the rest of the year.
How does the Medicare Donut Hole work?
When you are in the Coverage Gap, or the Donut Hole, you will pay 35% of the cost of name brand drugs and 44% of the cost of generic drugs. You stay in donut hole until your year to date costs exceed a certain amount pre-determined each year by Medicare. In 2018 this amount is $5,000. Once your total drug costs go over $5,000 for the plan year, you move into the final stage of the Part D drug plans known as Stage 4 or the “Catastrophic Coverage” stage.
Cost sharing for drugs will vary from plan to plan, and it is important to get an estimate of your drug costs during the Annual Enrollment Period each year to see if your drugs will fall into the dreaded “Donut Hole”.
Medicare Donut Hole FAQ’s
How do you avoid the Donut Hole?
You hit the donut hole when your drug costs exceed about $3,700 for a plan year. Seeking out lower cost alternatives, like generic drugs, will keep overall costs down and may help you avoid the donut hole.
Do Medicare Advantage Plans work better in the Donut Hole?
Medicare Advantage plans can be a great alternative to keep your monthly premiums down, however, having a Medicare Advantage plan does not eliminate the donut hole. You will still have cost sharing for drugs in a Medicare Advantage plan, and the 4 phases of the drug plan apply here as well.
When does the Donut Hole End?
The 4 Phases of the Part D drug plans are established by Medicare each year. You reach the donut hole when your total drug costs for the year exceed about $3,700. You will come out of the donut hole when your total drug costs exceed about $5,100 for the year. You will then move to the final stage of the Part D drug plans known as the Catastrophic Phase.
When is “Extra Help” in the coverage gap?
Medicare “Extra Help” is available to certain Medicare beneficiaries that qualify. Typically, those with low incomes…
If you qualify for “full” Extra Help, you’ll pay no more than $3.35 for generics and $8.35 for brand-name covered drugs in 2018.
If you qualify for “partial” Extra Help, your coverage will last throughout the year, you’ll pay a reduced premium, and a deductible of up to 15% of the cost of your medications in 2018.
Have additional questions? Feel free to give one of our licensed insurance agents a call to get your Medicare questions answered today!