The donut hole, or coverage gap, is one of the most controversial parts of the Medicare Part D prescription drug benefit. It has caused a considerable amount of confusion for many people when they suddenly are required to pay a higher price for their prescription drugs. Please be sure to understand how the donut hole works to avoid the confusion and shock of paying higher prices for your prescriptions should you reach the donut hole.
The donut hole, also known as the “coverage gap”, is when the cost of your drugs reaches a certain limit. For 2020, the donut hole begins when your drug cost reaches $4,020. Before you reach the donut hole, you will typically pay a co-pay for each medication. Once you are in the donut hole (coverage gap), you will be responsible to pay a percentage of the cost for your medications. For 2020, you will pay 25% of the cost of your brand name and generic medications. So the more expensive your medication, the more you will be paying out of pocket. For example, if you are taking a brand name drug that cost $100, then you will pay 25% of the cost of the drug. That drug will cost you $25 while in the donut hole.
Thankfully, there is a limit while in the donut hole. Once your total out of pocket drug expenses reaches $6,350 (for 2020), then you will be out of the coverage gap. At that point, you will be in the “catastrophic coverage” stage. While in this stage, you will pay 5% of the cost of your drugs, or $3.60 for generic and $8.95 for brand name drugs (whichever is greater).
This a commonly asked question when shopping around the various Part D drug plans for clients. Before enrolling our clients into a drug plan, we do a free analysis that will estimate your drug cost for the year. We will be able to estimate when in the year you will reach the donut hole (many of our clients will never reach the donut hole). If you are taking many expensive medications then your chances of reaching the donut hole will be higher.
Your drug plan will also mail out monthly statements that tell you exactly how much you have already spent on medications This will help you keep track of your monthly total drug cost.