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.
In 2019, beneficiaries of a Medicare prescription drug plan pay 25 percent of the costs of their brand name drugs and 37 percent of generic drug costs while they’re in the Medicare donut hole.
The donut hole will go away in 2020. Starting in 2020, Medicare Part D plan beneficiaries will pay 25 percent of their brand name and generic drug costs while they’re in the coverage gap.1
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 is closing faster for brand name drugs in 2019. This is because of the Bipartisan Budget Act of 2018, signed into law by President Donald Trump.
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 2019, the maximum deductible allowed by law is $415 for the year.
Some Medicare prescription drug plans have a $0 deductible.
The Centers for Medicare & Medicaid Services (CMS) proposed that the 2020 Part D deductible will increase to $435 for the year.2
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 $3,820 for drugs during the calendar year in 2019, you enter the donut hole coverage gap.
In 2020, you will enter the Medicare donut hole once you and your plan have spent $4,020 on covered prescriptions.1
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.
If you enter the donut hole in 2019, you pay no more than 25 percent of the cost of brand name drugs and 37 percent of the cost of generic drugs until you leave the donut hole coverage gap.
You remain in this coverage gap until you have paid $5,100 in out-of-pocket costs for covered drugs in 2019. You then enter the catastrophic coverage phase.
You will exit the Part D donut hole in 2020 after you spend $4,020 in out-of-pocket costs for your covered drugs.1
Once you reach the $4,020 threshold in 2020 ($5,100 in 2019), 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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1 CMS. Costs in the coverage gap. Retrieved May 2019, from www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/costs-in-the-coverage-gap.
2 CMS. Announcement of Calendar Year (CY) 2020 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter. (Apr. 1, 2019). Retrieved from www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2020.pdf.
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