Understanding the Part D Donut Hole
You may already know that Medicare Part D is the prescription drug coverage part of Medicare. The “donut hole” is temporarily reduced coverage of your medication costs. It doesn’t happen to everyone – read more to see if the donut hole might affect you.
Medicare Part D: A Brief Overview
Before we jump into the Part D donut hole, here’s a quick rundown on Medicare Part D.
- You don’t get this coverage automatically, in most cases. If you want Part D coverage, you need to sign up for it.
- You can get Medicare prescription drug coverage in two different ways.
- A stand-alone Medicare Part D prescription drug plan can work alongside your Original Medicare (Part A and/or Part B) coverage.
- A Medicare Advantage prescription drug plan provides your Medicare Part A and Part B benefits, and prescription drug coverage as well.
The Medicare Part D Donut Hole
The donut hole is a coverage gap that happens after you and your plan have spent a certain amount of money on prescription drugs in one calendar year.
Whether you’re enrolled in a stand-alone Medicare Part D Prescription Drug Plan or a Medicare Advantage Prescription Drug plan, you typically pay a cost-share amount for each prescription drug. Your cost-share could be a percentage of the drug’s cost (coinsurance), or a fixed amount (copayment). These expenses count toward the donut hole.
If you have high prescription drug expenses, you may pass into the Medicare donut hole. You enter the donut hole coverage phase when the total amount you and your plan have paid for medications reaches a Medicare pre-defined threshold. This amount is $3,750 in 2018. You may pay a different amount – often less – for your covered prescription drugs while you’re in the donut hole than you paid earlier in the year while you were in the initial coverage stage.
Thanks to the Affordable Care Act, the donut hole is gradually going away. When this happens, people with Medicare Part D coverage will pay on average 25% of the cost of covered prescription drugs. However, the donut hole won’t be fully phased out until 2020.
Medicare Part D Donut Hole: How will it affect me?
Many people with Medicare Part D prescription drug coverage do not reach the donut hole phase. You won’t enter the donut hole if either of the following applies to you:
- You don’t reach the pre-defined amount ($3,750 in 2018).
- You receive Extra Help.
How much will I pay for prescription drugs while I’m in the donut hole?
The Affordable Care Act created discounts to help you pay for covered prescriptions during the Medicare donut hole phase.
- In 2018, a 65% discount applies to most covered brand-name prescriptions. Typically, you pay the remaining 35% of the cost of brand-name prescription drugs.
- A 56% discount applies to generic medications in 2018. This means you pay the remaining 44% of the cost of covered generic medications.
While in the donut hole, you continue to receive your prescription drugs from retail and/or mail order pharmacies in your plan’s network. This allows you to take advantage of any reduced prescription drug costs negotiated by your plan.
Your Medicare prescription drug plan sends you a monthly statement of prescription drug expenses (explanation of benefits). This statement explains how much you and the plan have paid for covered prescriptions, and tells you which coverage stage you’re in.
How do I get out of the Medicare donut hole?
You leave the donut hole when you have paid a Medicare pre-determined amount on covered medications. In 2018, this amount is $5,000. Out-of-pocket costs that help you leave the donut hole coverage phase include:
- The deductible you paid, if any
- The amount you and your plan spent before entering the donut hole
- The amount you paid for covered medications during the donut hole coverage phase
- The manufacturer’s discount amount for any brand-name prescription drugs you take
- Any amounts paid by other people and agencies (e.g., State Pharmaceutical Assistance Program, AIDs Drug Assistance Program, Indian Health Service) on your behalf for covered prescription drugs
After you leave the donut hole, you move into the “catastrophic” stage of Part D coverage. At this stage, your Medicare Prescription Drug Plan pays most of your prescription drug costs for the rest of the calendar year. You pay a small copayment or coinsurance for the cost of covered medications.
Do you have questions about your Part D coverage? Feel free to contact eHealth to speak with a licensed insurance agent. You can compare Medicare prescription drug plans with the click of a button – just click Browse Plans on this page.