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Medicare Part D Donut Hole (Coverage Gap)


It is vital to understand how out-of-pocket costs are determined when you use your Medicare benefits. One example is the donut hole in Medicare Part D prescription drug plans. Below, we explain the donut hole phases, how to prepare for them, and everything else beneficiaries should know about the coverage gap.

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What is the Donut Hole in Medicare?

The donut hole is the coverage gap phase in Medicare Part D plans. During this coverage phase, the beneficiary has a temporary limit on their Medicare Part D coverage. Thus, after spending a specific amount on a drug plan, you are responsible for a certain percentage of the retail cost of your drug.

In 2022, the coverage gap discount is 75%. Therefore, the beneficiary is responsible for 25% of drug costs in the donut hole.

Medicare Donut Hole

How Does the Medicare Donut Hole Work?

Prescription drug coverage consists of multiple stages. The first phase starts on your prescription drug plan’s effective date – often January 1.

This primary phase involves reaching your deductible – up to $480. You are responsible for paying 100% of this cost.

After meeting the deductible, you enter the initial coverage phase. During this phase, you are only responsible for copayments. After the cost of drugs reaches $4,430, you fall into the donut hole.

While in the donut hole, you will need to pay 25% of the cost for generic and brand-name drugs until what you pay out-of-pocket reaches $7,050. The final phase, catastrophic coverage, kicks in when you leave the gap.

You are responsible for just $3.95 for generic medications and $9.85 or 5% of your drug costs in the catastrophic coverage phase, whichever costs more. You will remain in this phase until the end of the calendar year. The monthly statements you obtain from your plan provider should show your current status regarding the donut hole.

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How to Avoid the Medicare Donut Hole

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How Do I Get Out of the Donut Hole?

Once your costs for prescription drugs meet $7,050, you will move into the next coverage phase. When this happens, catastrophic coverage kicks in automatically.

During the catastrophic coverage phase, you cover $3.95 for generic medications and $9.85 or 5%, whichever costs more, and your policy will settle 95% of the remaining costs until the end of the plan year. Then, the cycle repeats annually.

Do Medicare Advantage Plans Cover the Donut Hole?

Private insurance companies manage Medicare Part C plans, often including prescription drug benefits. These plans work similarly to standard Medicare Part D plans.

Thus, Medicare Advantage Prescription Drug Plans still involve coverage gaps. A Medicare Advantage plan might cover some generic medications in the donut hole, but these do not serve to close the gap faster due to their lower prices.

FAQs

Why is there a donut hole in Medicare Part D?
The donut hole was created to incentivize people to use generic drugs. Thus, keeping beneficiary costs low and reducing Medicare expenses on the program level.
Do all Medicare Part D plans have a donut hole?
All Medicare Part D plans follow the same drug phases. Every prescription coverage plan involves the gap known as the donut hole.
Will I enter the donut hole if I receive Extra Help?
Those who get Extra Help pay reduced amounts for their prescriptions throughout the year, so they are unlikely to reach the donut hole.
How do I know if I am in the donut hole?
You will receive an Explanation of Benefits (EOB) notice in the mail from your carrier for each month you utilize your drug plan. The EOB notice informs you of your current coverage phase, and you can see how close to the donut hole you are based on the dollar amount required to reach the next phase.
What costs count toward the donut hole?
The cost of the drugs on your plan’s formulary will count toward you entering the donut hole. For example, if you purchase a $500 drug and your copay is $75, the full $500 will count toward your initial coverage phase.
Does the donut hole discount only apply to drugs on my Medicare Part D plan’s formulary?
Yes, the donut hole discount only applies to drugs on your prescription drug plan’s formulary unless your plan approved a formulary exception.
Can I find Medicare Part D plans without the donut hole?
No, all Medicare prescription drug plans include the donut hole. If you anticipate reaching the donut hole and have trouble with costs, you can apply for Extra Help with Medicare Part D.

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How to Get Help with the Donut Hole

We understand that the donut hole can be confusing, and we hope we have helped you make sense of it. Many people with or without current prescription drug coverage have questions about this topic.

Luckily, we are not only a Medicare education resource center – we can also help find the best coverage for your needs. Enrolling in the best Medicare Part D plan for your prescription drugs will help you avoid the donut hole and give you maximum coverage for your prescriptions.

Call the phone number above to speak with an agent about your options. If you don't have time to talk now, fill out our rate form so we can prepare a rate comparison from the top carriers in your area.

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Sources:

MedicareFAQ is dedicated to providing you with authentic and trustworthy Medicare information. We have strict sourcing guidelines and work diligently to serve our readers with accurate and up-to-date content.

  1. Costs in the Coverage Gap, Medicare. Accessed April 2022.
    https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/costs-in-the-coverage-gap
  2. How to avoid the Medicare Part D Donut Hole, NCOA. Accessed April 2022.
    https://www.ncoa.org/article/how-to-avoid-the-medicare-part-d-donut-hole

Jagger Esch

Jagger Esch is the Medicare expert for MedicareFAQ and the founder, president, and CEO of Elite Insurance Partners and MedicareFAQ.com. Since the inception of his first company in 2012, he has been dedicated to helping those eligible for Medicare by providing them with resources to educate themselves on all their Medicare options. He is featured in many publications as well as writes regularly for other expert columns regarding Medicare.

2 thoughts on “Medicare Part D Donut Hole (Coverage Gap)

  1. Are Medicare telephonic agents required to explain the 4 stages and what they’ll pay in each stage based on their current medications?

    1. Hi DJ! If your current medications will reach the donut hole, only then is the agent required to explain how the four stages work.

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