What is ‘The Donut Hole’?
Medicare has strict regulations around its prescription drug plans, and one of the most commonly asked about features is ‘the donut hole’. Also known as, ‘the coverage gap’, this benefit structure applies to both stand-alone Medicare Prescription Drug Plans and Medicare Advantage Prescription Drug plans, but not everyone enters it. If you’re currently taking medications or are concerned about lowering your prescription drug costs, it may be helpful for you to understand what the Medicare ‘Donut Hole’ is and how to avoid it.
Prescription Benefit Chart
It may help you to understand the overall progress an individual may encounter as they fill their prescriptions throughout the year. This chart will serve as a useful aide. It describes the various stages that you may encounter. While a prescription plan is not required to have a deductible, if the plan does not, it is required to have an actuarial amount that is that is the same.
The coverage gap is a temporary limit on what most Part D Prescription Drug Plans or Medicare Advantage Prescription Drug plans pay for prescription drug costs. While you’re in the coverage gap, you might pay higher costs for brand-name and generic drugs. Below we’ve described each phase:
- Deductible phase: For most stand-alone Medicare Prescription Drug Plans and Medicare Advantage Prescription Drug plans, you’ll pay 100% for medication costs until you reach the yearly deductible amount (if your plan has one). The standard deductible for 2018 is $405.
- Initial coverage phase: After you’ve reached the deductible, you’ll enter the initial coverage phase, where you will pay the plan’s cost share for covered medications. For example, if your plan benefit includes a 25% coinsurance in this phase and you’re taking a medication that costs $400 a month, your out-of-pocket-cost would be approximately $100 a month.
- Coverage gap, also known as the “donut hole”: begins if you and your plan spend a combined $3,750 in 2018 as described above. While in the coverage gap, you’ll typically pay 35% of the plan’s cost for brand-name drugs and 44% of the plan’s cost for generic drugs in 2018. You’re out of the coverage gap once your yearly out-of-pocket drug costs reach $5,000 in 2018.
- Catastrophic coverage phase: Begins if your out-of-pocket costs reach $5,000 in 2018. During the catastrophic coverage phase, you’ll only pay a small coinsurance or copayment for covered prescription drugs for the remainder of the year.
Closing the Gap
Below is a chart of how the costs are diminishing each year within the coverage gap.
|Year||Percent You pay for Brand Name Drugs||Percent You pay for
It can be a good idea to review your Medicare Prescription Drug Plan coverage every year, to see if your plan covers the medications you need now and may need in the upcoming year.
Frequently Asked Questions
How much is the Part D penalty?
In 2018, Medicare recalculated Mrs. Martinez’s penalty using the 2018 base beneficiary premium ($35.02). So, Mrs. Martinez’s new monthly penalty in 2018 is 31% of $35.02 or $10.86 each month. Since the monthly penalty is always rounded to the nearest $0.10, she pays $10.90 each month in addition to her plan’s monthly premium.
Here’s the math:
.31 (31% penalty) × $35.02 (2018 base beneficiary premium) = $10.86
$10.86 rounded to the nearest $0.10 = $10.90
$10.90 = Mrs. Martinez’s monthly late enrollment penalty for 2018
How can Buffer Benefits help me with finding a Part D plan?
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