The Dreaded Donut Hole – UPDATED for 2020 / 2021

 In this article, we discuss the ‘Donut hole’ and we answer additional questions about how to avoid it.  Medicare and the Medicare Part D supplemental insurance plans are vital to protecting yourself.

The Donut Hole – What is it?

Most Medicare drug plans have a coverage gap, called the “donut hole”. This means there’s a temporary limit on what the drug plan will cover for your prescription drugs.

The total cost at which the donut hole begins is adjusted each year. You must pay a percentage of medication costs while you’re in the Medicare donut hole.

Not everyone will enter the coverage gap. The coverage gap begins after you and your drug plan have spent a certain amount for covered drugs. Once you and your plan have spent $4,020 on covered drugs in 2020, you’re in the coverage gap. This amount may change each year.

What does “In the donut hole” mean?

Let’s continue with the 2020 update!

VERY GOOD NEWS:

 The donut hole closed for all drugs in 2020, meaning that when you enter the coverage gap you will be responsible for 25% of the price of your drugs. In the past, (The Dreaded Donut hole) you were responsible for a higher percentage of the cost of your drugs.

Although the donut hole closed, you may still see a difference in cost between the initial coverage period and the donut hole. For example, if a drug’s total cost is $100 and you pay your plan’s $20 copay during the initial coverage period, you will be responsible for paying $25 (25% of $100) during the coverage gap

Brand-name prescription drugs and the Donut Hole:

Once you reach the coverage gap, you’ll pay no more than 25% of the cost for your plan’s covered brand-name prescription drugs. 

Although you’ll pay no more than 25% of the price for the brand-name drug, almost the full price of the drug will count as out-of-pocket costs to help you get out of the coverage gap. What you pay and what the manufacturer pays (95% of the cost of the drug) will count toward your out-out-pocket spending. Here’s a breakdown:

  • Of the total cost of the drug, the manufacturer pays 70% to discount the price for you. Then your plan pays 5% of the cost. Together, the manufacturer and plan cover 75% of the cost. You pay 25% of the cost of the drug.
  • There’s also a dispensing fee. Your plan pays 75% of the fee, and you pay 25% of the fee.

What the drug plan pays toward the drug cost (5% of the cost) and dispensing fee (75% of the fee) aren’t counted toward your out-of-pocket spending.

Generic Drugs

For generic drugs, coinsurance is still higher while in the donut hole (37 percent, as opposed to 25 percent before the donut hole).Medicare will pay 75% of the price for generic drugs during the coverage gap.

You’ll pay the remaining 25% of the price. The coverage for generic drugs works differently from the discount for brand-name drugs. For generic drugs, only the amount you pay will count toward getting you out of the coverage gap.

Another change that’s effective January 1st, 2020 is the spending limits that get you into and out of the donut hole. In 2020, once you and your plan have spent $4,020 for the year (including your deductible), you will move into the donut hole. Once you’ve spent $6,350 out-of-pocket in 2020, you will move out of the donut hole and into catastrophic coverage.

How to get out of the Donut Hole

The 2021 Open Enrollment is almost upon us, and as of September 2020 there haven’t been any updates.  We suggest that you connect to one of the TrueCoverage insurance experts for the latest details on Medicare coverage.

TrueCoverage offers the widest selection of Medicare Part D plans.  Our insurance professionals are continually updated about the lasted options , so be sure to contact us with your questions.  We are here to help!