The Medicare donut hole is a temporary limit on what drug plans will pay for eligible medications. 


During this gap in prescription drug coverage, beneficiaries may have to pay a larger portion of their prescription drug costs until they reach catastrophic coverage.

DRUG PAYMENT
STAGES

INITIAL COVERAGE

In this drug payment stage:

  • You pay a copay or coninsurance (percentage of a drug's total cost). The plan pays the rest
  • You stay in this stage until your total drug costs reach $2850

COVERAGE GAP
DONUT HOLE

After your total drug costs reach $2850:

  • You pay:
47.5% of the cost of brand name drugs
72% of the cost of generic drugs
  • You stay in this stage until your total out-of-pocket costs reach $4,550

CATASTROPHIC COVERAGE

After your total out-of-pocket costs reach $4,550:

  • You pay a small copay or coinsurance amount
  • You stay in this stage for the rest of the plan year

WHAT IS THE DONUT HOLE?  CAN IT BE AVOIDED?

Most Medicare Part D plans come with a coverage gap, 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 catastrophic coverage.


What is the Medicare donut hole?

The Medicare donut hole is a temporary limit on what drug plans will pay for eligible medications.  Each year, beneficiaries hit the donut hole if they and their drug plan have spent a certain amount on covered drugs. This is called the initial coverage limit, which will change each year. 


In 2014, the coverage gap is reached when covered drug costs (what the beneficiary and the plan pay, in addition to the beneficiary’s Part D plan deductible) reach $2,850.

Once in the Medicare donut hole, beneficiaries must pay a percentage of their drug cost. Beneficiaries will pay a lower percentage toward their drugs while in the donut hole each year, until the year 2020, when it is estimated that beneficiaries will pay only 25% of their drug costs after reaching the donut hole. In 2014, beneficiaries in the donut hole will pay 47.5% of the cost of brand-name drugs and 72% of generic drug costs.


The donut hole will end when a beneficiary’s out-of-pocket expenses on medications on the plan’s formulary reaches a certain threshold, which may change each year. Please note that any money spent on drugs not included in the plan formulary will not count towards this total. In 2014, beneficiaries who have spent $4,550 out-of-pocket on eligible prescription drug costs in 2014 will get catastrophic coverage. This means that they are only responsible for a small coinsurance or copayment on their covered medications for the rest of the calendar year.


Can the donut hole be avoided?

Not everyone will enter the Medicare 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 health legislation, the donut hole is slowly being phased out over time.  However, for those still concerned, there are ways to avoid reaching the coverage gap each year:

  • Ask local pharmacies if they offer drugs you take at a reduced cost.
  • Find opportunities to buy prescriptions long-term, for three months or more, at a lower cost.
  • Ask the doctor if medications have lower cost generic options.
  • Always use a preferred pharmacy if the plan has one.
  • Get assistance from private, state, or federal programs that help with drug costs.

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