Have you heard of the Medicare “donut hole?” Maybe you just enrolled in Medicare Part D to help with your prescription drug coverage. If so, you could wonder about the different Part D benefit stages. There is a coverage gap known as the donut hole that you have to be aware of when you enroll in Medicare.
The donut hole is a stage in Part D’s coverage plan that can temporarily limit what medications the plan will and won’t cover. When you reach this stage, you might find yourself paying more for the covered prescriptions than you had to pay earlier.
Every year, you’ll enter this donut hole at a different dollar amount. The Affordable Care Act implemented yearly changes in the dollar threshold for the cost-sharing amount and the Medicare donut hole.
Is Everyone Impacted by the Medicare Donut Hole?
No. Not every Medicare beneficiary enters the donut hole stage in their Part D coverage. This donut hole starts after your Medicare Prescription Drug Plan and you have spent a specific amount for your prescription drugs in a calendar year. If you’re a beneficiary who spends less than the pre-set amount in a calendar year, you won’t enter this coverage gap. We listed a few reasons why you may not enter this stage below.
- If you have a Medicare Prescription Drug Plan that covers you specifically for the donut hole stage.
- You have another prescription drug coverage plan from a union or employer that pays for a percentage of your prescription costs.
- You use generic brands or don’t take a lot of prescription drugs.
- You get some help to pay for your prescription drug costs.
Understanding How the Medicare Part D Donut Hole Works
Once you fall into the Medicare donut hole, you’ll usually have to pay a certain percentage of your prescription drug cost. For 2019, this cost was 25% for every brand name prescription and 37% for every generic prescription. The costs couldn’t exceed these percentages. While you’re in the donut hole, you’ll keep getting your prescriptions from mail-order pharmacies or from retailers like you normally would.
Costs That Count Toward the Medicare Donut Hole
If you and your plan exceed a certain cap in a calendar year, you’ll enter the donut hole. This amount is $4,020 for 2020, and there are a few things that count toward it.
- Discounts you get on brand-name prescription drugs
There are also things that don’t count toward your Medicare donut hole. We’ve listed a few of the biggest ones below.
- Pharmacy dispensing fees
- Monthly Medicare Prescription Drug Plan premium
- Any prescription drugs you buy because your plan doesn’t cover them
Getting Out of the Medicare Part D Donut Hole
It is possible to get out of the Medicare donut hole. Once you spend a set amount of money out of your pocket, you’ll reach a benefit stage called catastrophic coverage.
In 2020, if you spend $6,350, you reach the catastrophic coverage stage for Part D. Once you hit this amount, your insurance will cover almost all of your prescription drug costs you have for the remainder of the calendar year. You’ll pay a very small coinsurance or copay amount for your covered prescriptions.