Whether you’re about to enroll in a Part D plan or you’re currently enrolled in one, it’s important to understand how the Medicare donut hole works. Below, we’ll explain the stages of the donut hole and how to prepare for it.
What is the Donut Hole in Medicare?
The donut hole is the coverage gap in Medicare prescription drug plans. During this period; the beneficiary has a temporary limit on their Part D coverage. This means that after spending a specific amount on a drug plan, you’re responsible for copayments for prescriptions. Then, you’re responsible for costs up to a specific limit.
How Does the Medicare Donut Hole Work?
Prescription drug coverage consists of multiple stages. The first stage starts when the year begins and involves reaching your deductible, which can be up to $480. You are responsible for paying 100% of this cost. Then, you reach the initial coverage stage, when you’re only responsible for copayments. After the cost of drugs reaches $4,330, you fall into the donut hole.
While you’re in the coverage gap, you’ll need to pay 25% of the cost of generic and brand-name drugs, until what you pay reaches $7,050. Catastrophic coverage kicks in when you’re out of the gap, leaving you responsible for just 5% of your drug costs. This lasts until the end of the year when your coverage ends and your plan restarts. The monthly statements you obtain from your plan provider should show your current status regarding the donut hole.
How to Avoid the Medicare Donut Hole
- Compare Drug Plans Annually
- Consider Lifestyle Change
- Use Generics When Possible
- Compare Pharmacies
- Price Check Drugs Online
- Save with a Mail Order Pharmacy
- Ask About Drug Manufacturer’s Coupons
- Pharmaceutical Assistance Programs
- Consider Applying for Extra Help
How Do I Get Out of the Donut Hole?
You’ll get out of the gap when your costs for prescriptions during the gap period reach $7,050. You’re fully responsible for reaching this amount, but your drugs are also discounted while in the donut hole.
Once you reach the limit, catastrophic drug coverage kicks in automatically. When this happens, your policy will settle 95% of the remaining costs until the end of the year. Then, the cycle repeats every calendar year when you must start by meeting your deductible again.
What Are Medicare Part D Straddle Claims?
In the context of Medicare prescription drug plans, straddle claims refer to circumstances in which someone’s cost for one prescription brings them from one phase of coverage to the next. Thus, the claim falls within two different coverage phases.
Because the donut hole is a coverage gap, a beneficiary’s out-of-pocket costs aren’t so clear when they’re between phases. In these cases, your plan calculates what you owe for the prescription in question using the coverage gap discount and the prescription dispensing fee.
Do Medicare Advantage Plans Cover the Donut Hole?
Private insurance companies manage Part C plans, which often include prescription drug benefits. These plans work similarly to standard Part D plans. Thus, they still involve coverage gaps. An Advantage plan might cover some generic medications in the donut hole, but these don’t serve to close the gap faster due to their lower prices.
What is Donut Hole Prescription Assistance?
Ask your doctor if any other medicine on your plan’s formulary would be as effective for your condition as the ones you’re currently using. Using lower-cost drugs, like generics or similar drugs, will substantially lower your costs.
It pays to have donut hole assistance like Extra Help or a state pharmacy assistance plan that can pay a portion or all your costs while in the gap.
If you don’t have extra coverage, you can consider:
- Lower-cost drugs from countries like Canada
- Free or low-cost medicines supplied by charities, patients’ organizations, or local medical clinics
- Low-cost or free medicines from the assistance programs, managed by pharmaceutical manufacturers
How to Get Help with the Donut Hole
We understand that the donut hole is a confusing topic and we hope we helped you make sense of it. Many people with or without current prescription drug coverage have questions. Luckily, we're not only a Medicare education resource center – we can also help find the best coverage for you. Having Part D as soon as you're eligible for Medicare will ensure you don't incur a Part D late enrollment penalty.
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