Among the many Medicare election choices are a multitude of coverage limitations and confusing lingo. A common source of confusion is the Medicare Prescription Drug Plan Part D coverage gap, commonly referred to as the “Donut Hole”. It is important to know the limits on what a drug plan will cover for your prescription drugs before the coverage gap kicks in. This will help you determine the out-of-pocket costs you could incur for your particular prescriptions in any given year. Here is a brief explanation on the Medicare Part D coverage gap to help clarify how the coverage gap works.
*All amounts have been updated with the 2023 Medicare prescription drug amounts.**
What is the Medicare Part D “Donut Hole”?
Medicare Part D has an initial coverage limit on how much most Medicare Part D Prescription Drug Plans will cover. In the initial coverage period, your plan will pay a higher coinsurance amount for your prescription drugs and you pay a smaller portion after meeting your plan’s deductible. Once you and the plan have spent a total of $4,660 on prescription drugs, you enter the coverage gap (Donut Hole). Once you reach the coverage gap, you’ll pay no more than 25% of the plan’s covered generic and brand-name prescription drugs. Some plans may offer you even lower costs in the coverage gap. It is important to note, people who get Social Security Extra Help paying Part D costs won’t enter the coverage gap.
When do you leave the Donut Hole?
The coverage gap will end after your out-of-pocket expenses reach $7,400. This out-of-pocket expense total is referred to as TROOP (True out of pocket cost). While you are in the donut hole, ALL of what you pay for Name Brand drugs, ALL of what you pay for Generic Drugs and MOST of what the drug manufacturer pays for Name Brand drugs count toward the TROOP. Once you reach the TROOP of $7,400 you will enter catastrophic coverage. During catastrophic coverage, you will pay the greater of 5% coinsurance or $4.15 copay for generic and 10.35 copay for all other drugs.
What Resources are available to me if I think I might enter the Donut Hole?
There are Medicare Prescription Drug Plans and Medicare Advantage Plans that offer coverage for some prescriptions while you are in the “donut hole”. Shop and compare plans carefully. If you are working with a Medicare Broker they will be able to help you search for the plan that best meets your needs. Medicare Brokers are compensated by the plan sponsor, so their services are provided for free to you, the consumer. In addition, any Medicare Eligible Beneficiary can apply for extra help with prescription drug coverage by applying online at www.ssa.gov/extrahelp. Income and asset limits apply.
When is the deadline to choose a new Medicare Prescription Drug plan?
The Annual Enrollment Period ends on December 7th. During the Annual Election Period, you can select a plan between October 15 to December 7 for the next year Medicare coverage.
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