By Marcus A. Brummett – June 27 2017
What is The Donut Hole and how does it work?
Each Medicare Part D Plan has a period of time in which the coverage of your prescriptions changes to the coverage gap, also called the “Donut Hole.” Once the total cost of prescriptions that both the plan and the recipient have paid reaches $3,700, then each plan enters the Donut Hole. At this time, those in the gap will have to pay up to 40% of Brand Name prescriptions and up to 51% of generics. This will remain until the Part D recipient has paid $4950 out-of-pocket. However, 50% of the manufacturer brand name discount is also applied. Also, some plans offer extra coverage during this time.
Example: Mr. Smith is in the Donut Hole and one of his brand name prescriptions costs $500 dollars. Mr. Smith will pay up to $200 (40%) for this prescription. However, 50% ($250) of the total cost of the drug also counts towards his total out of pocket. So, $450 would actually go toward getting him out of the Donut Hole. For a more detailed breakdown of this process and cost you can visit here and read the examples that include extra details about what does and doesn’t count towards your total out-of-pocket costs.
The out-of-pocket cost includes any deductibles or co-pays Mr. Smith has paid, even if it was before he entered the Donut Hole. Monthly premiums to plans do not count toward getting out of the Donut Hole.
What happens after the Donut Hole?
After someone has reached the $4950 out-of-pocket, they will enter the Catastrophic Coverage Phase until the end of the calendar year. During this time, each person will pay either 5% of the cost of each drug, or $3.30 for generics and $8.25 for brand-name drugs, whichever is larger.
This whole process begins again January 1st of each year, even if you stay with the same plan.
Extra things to know about Part D’s Donut Hole:
The cost during the Donut Hole is gradually decreasing because of the Affordable Healthcare Act. By 2020, the cost of both Brand name and Generic medication will be only 25% during the Donut Hole.
Switching from a Brand name to a generic at the beginning of the year can help prevent you from entering the donut hole. If this is an option and you are worried about this coverage gap, this is worth asking your doctor and pharmacist about.
If you qualify for extra help via Social Security’s Low Income Subsidy for Part D, then the donut hole will not work as described above. These recipients will not enter the Donut Hole.
If you do not qualify for the Low Income Subsidy program, there is still a possibility you would qualify for the State Pharmaceutical Assistance Program. This program can help those on Brand-name medications get reduced costs.
There are 24 different Medicare Part D Plans in Tennesee and 23 different Part D Plans in Georgia. The plan you sign up on can affect when you go into the Donut hole and how much your total out of pocket for the year will be. Insuring that you sign up on the best plan for you is necessary to best prepare each year for the Donut Hole.