The Medicare Part D “donut hole” is a temporary coverage gap in how much a Medicare prescription drug plan will pay for your prescription drug costs. Starting in 2020, Medicare Part D plan beneficiaries pay 25 percent of their brand name and generic drug costs while they’re in the coverage gap.
The Medicare Part D donut hole has been closing in recent years due to provisions in the Affordable Care Act (ACA), also known as Obamacare.
The donut hole was set to disappear in 2020, but it closed faster for brand name drugs in 2019. This is because of the Bipartisan Budget Act of 2018, signed into law by President Donald Trump.
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The Medicare donut hole coverage gap is one of four coverage levels (coverage periods) that are in a Part D prescription drug plan.
You enter the Medicare donut hole after your deductible period and your initial coverage period end and before you enter catastrophic coverage.
Some (but not all) Medicare Part D plans have a deductible, which is the amount of money you must spend on covered drugs before your Medicare drug plan coverage kicks in.
For example, if you have a Part D plan with a $200 deductible, you’re required to pay the first $200 of costs for covered drugs in a calendar year out of your own pocket.
Once you meet your deductible, your Part D plan helps pay for all covered drugs for the remainder of the year. In 2020, the maximum deductible allowed by law is $435 for the year.
Some Medicare prescription drug plans have a $0 deductible.
After you meet your plan deductible, you enter the initial coverage period.
After you meet your Part D deductible, you enter the initial coverage period. During this phase, you pay a copayment (flat fee) or coinsurance (percentage) for your covered medications.
Copayment and coinsurance amounts will vary by plan. Many plans will feature different amounts for generic and brand name drugs. You can check with your plan formulary (drug list) to learn more about what your costs might be for different drugs.
Generic drugs are typically on a lower tier and have lower costs than brand name drugs, which are typically on a higher tier.
Once you and your plan combine to spend $4,020 for drugs during the calendar year in 2020, you enter the donut hole coverage gap.
Once you enter the donut hole in 2020, your Part D plan’s coverage becomes more limited.
In 2020, you’ll pay no more than 25 percent of the price for brand name drugs and generic drugs while you’re in the donut hole.
You remain in this Part D donut hole coverage gap until you have paid $6,350 in out-of-pocket costs for covered drugs in 2020. You then enter the catastrophic coverage phase.
Once you reach the $6,350 threshold in 2020, you enter the final phase of Part D coverage. This is called catastrophic coverage.
During the catastrophic coverage phase, you only pay a small coinsurance or copayment for your covered prescription drugs for the remainder of the year.
If you have Medicare Extra Help, you will not face Part D donut hole costs.
Extra Help is an assistance program that helps lower the cost of Part D premiums, deductibles, coinsurance and copayments.
There is no coverage gap for Medicare beneficiaries who receive Extra Help.
A licensed insurance agent can help you learn about Medicare Part D plans and Medicare Advantage plans with prescription drug coverage that may be available where you live.
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