The Medicare Part D Coverage Gap (“Donut Hole’) : What You Need to Know
Part D will provide Coverage for your prescriptions, but the cost share could change during the year.
Find out more below.
Over 43 million Americans receive prescription drug benefits through the Medicare Part D program. This private insurance policy helps Medicare beneficiaries with the costs of their medications.
Yet, like with all insurance, Medicare Part D has its limits. Some Medicare beneficiaries will experience the Part D coverage gap, commonly called the Donut Hole. During this time, the coinsurance for your medications will be higher. To many, this might seem concerning Senior Market Agents Network is here to help you understand how Part D works and choosing the proper Part D coverage.
What is Medicare Part D?
Original Medicare is a government-supported program consisting of Medicare Parts A & B. Coverage pays a policyholders’ costs of hospital care, doctors’ visits, vaccinations, surgeries and similar charges. However, Parts A & B will not pay for most prescription drugs you get from your pharmacy. For that protection, you can turn to Medicare Part D.
Part D prescription drug coverage is an optional, private insurance plan offered by various insurers in your local area. These plans are regulated by the Medicare program, and cover most prescription drug costs in order to save the policyholder out-of-pocket expenses.
Prescription coverage is a great benefit that every senior on Medicare should consider. Often, qualifying for a plan is easier than you think.
- You qualify for a part D plan if you have Original Medicare Parts A and qualify for Part B.
- If you have a Medicare Advantage plan (Part C), these plans often offer prescription coverage within the plan.
The Limits of Part D Coverage
Part D plans cover a large selection of drugs (a formulary) that can include name-brand, generic and specialty prescriptions. Drugs will be divided into tiers that denote the costs you will pay for different drugs; Drugs in higher tiers often cost more. The various Part D plans will differ in how Medicare beneficiaries pay for different tiers and items.
The coverage Gap starts after the full cost of your drugs reach a certain limit during the year. This is called the Coverage Gap also known as the Part D Donut Hole. In 2019 the drug cost coverage limit is $3820. If you enter Part D Coverage Gap you will pay no more than 37% coinsurance for generic drugs and 25% for brand name drugs. After your yearly out pocket drug cost reach $5100 you will pay the greater of 5% coinsurance or $3.40 for generic and $8.50 for all other drugs.
What is the Coverage Gap in Medicare Part D known as "Donut Hole"?
Think of a donut hole literally; the hole is a space where there is less donut. You can think of the Part D Donut Hole in the same way; it is a space in your plan where there is less coverage.
In official language, this is the Part D coverage gap. If you reach your plan’s Donut Hole, the plan will pay less for your drug costs. You could consider generics to lessen the cost.
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How does the Donut Hole Work? What Happens When You Reach the Donut Hole?
As you and your plan pay for prescriptions at your pharmacy, the Part D plan tracks how much you spend. After the two parties, combined, surpass a certain cost spent, then the initial spending limit (the coverage gap) will kick in. That is when you enter the Donut Hole.
- In 2019, Part D’s initial coverage limit (where cost share changes) is $3,820
After you reach this spending limit, your Part D plan will pay a less amount for your drug costs. While in a very few cases, limited coverage continues, most Donut Holes require you to pay the full cost of your drugs.
Is The Donut Hole Going Away? How Much do You Have to Spend to Get Out of the Donut Hole?
You will only remain in the Donut Hole for a certain time. That time lasts until you reach Part D’s Out-of-Pocket Threshold.
- The out-of-pocket threshold in 2019 is $5,100
Again, your plan will tabulate your personal out-of-pocket drug costs (how much you pay without help from your plan) until you have spent $5,100 for the plan period. When you reach that phase you essentially get out of the Coverage Gap “Donut Hole.”
After exiting the Coverage Gap, you will enter a phase of the Part D plan called Catastrophic Coverage. Your plan will once again start covering a significant portion of your prescription costs for the remainder of 2019. In the catastrophic phase you will pay the greater of 5% coinsurance or $3.40 for generic and $8.50 for all other drugs.
Calculating the Donut Hole
Let’s consider a standard Part D coverage gap scenario.
- Medicare Part D will track your out-of-pocket drug costs until you and your insurer spend $3,820 in costs. Then, you will enter the donut hole.
- That will remain in place until your personal out-of-pocket costs reach $5,100.
- After spending $5,100, you’ll enter catastrophic coverage.
To calculate that $5,100, Medicare will combine the various plan costs you pay with your own money. Some of the costs used to calculate the $5,100 include:
- Your deductible ($415 in 2019)
- Your out-of-pocket costs during the initial plan period (not the portion your plan pays). Even as you begin to reach the coverage gap, you’ll also be accumulating funds to help you get out of it.
- Out-of-pocket costs paid for you by others, like family members or charities
- The full costs of brand-name drugs you buy during your time in the Donut Hole*
- Funds paid by State Pharmaceutical Assistance Programs (SPAPs), AIDS Drug Assistance Programs, and the Indian Health Service
*See Drug Manufacturers Bear a Cost Burden below: The full cost of brand-name drugs in the coverage gap might not be the cost you actually pay out-of-pocket.
Is There Insurance That Covers the Medicare Part D Coverage Gap?
There are various incentives out there that can help you avoid the full cost of the coverage gap. Let’s look at some of these:
Drug Manufacturers Bear a Cost Burden
In 2019, drug makers themselves must pay at least 75% of the cost of brand-name drugs and 63% of generic drug costs, even while you are in the Hole. So, if you buy a name-brand drug for $100, the manufacturer will pay $75 while you will pay $25 ($100 - $75 = $25). Nevertheless, the law still requires 95% of the full drug retail cost to go towards your $5,100 out-of-pocket maximum.
Generic Drug Options
Generic drugs are medications that do not include a brand-name label. However, when compared to certain brands, they provide near-identical treatment for your condition for all intents and purposes. Unless your condition or physician explicitly require a brand-name drug, you’ll often find generics a very affordable option compared to other medications. Whether you are in or out of the Donut Hole, you will probably pay the lowest overall costs for generics.
Many brand-name drug manufacturers offer significant savings coupons on certain drugs. For example, using this coupon might help you save upwards of 50% on your co-payment. You can often obtain coupons by visiting the manufacturer’s or drug’s web site, or by calling.
No-Hole Prescription Drug Plans
Certain Medicare Part D plans will not include Donut Holes. Nevertheless, these plans might have higher premiums and limit the drugs they will cover in the Hole. However, their long-term cost benefits might prove acceptable in your case.
If your income or financial resources make entering the Donut Hole a challenge, you might have options:
- Various states offer programs to help low-income individuals always afford their drugs. Visit Medicare’s Pharmaceutical Assistance page for more information.
- The federal Medicare program offers the Extra Help program. It helps low-income individuals who need prescriptions afford those costs.
Closing the Hole
The good news, the Part D coverage gap will completely disappear in the not-too-distant future. In 2019, manufacturers will bear more of a cost of non-covered drugs than the Part D policyholder. That means the Donut Hole is on a stable path to final closure. In 2020 and beyond, there will be no Donut Hole, and that represents a stable Medicare System for years to come.
In the meantime, let Senior Market Agents Network help you get the Part D coverage you need. We’re ready and able to help. Call us at 877-209-4949 now.
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