The Doughnut Hole

What is a Doughnut Hole?

The Medicare Part D donut hole is a temporary coverage gap in how much a Medicare prescription drug plan will pay for your prescription drug costs. Starting in 2020, Medicare Part D plan beneficiaries pay 25 percent of their brand name and generic drug costs while they're in the coverage gap.

How does the donut hole work?

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 cost of your drugs. In the past, you were responsible for a higher percentage of the cost of your drugs.

Although the donut hole has 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 $200 and you pay your plan’s $40 copay during the initial coverage period, you will be responsible for paying $25 (25% of $200) during the coverage gap.

How do I get out of the donut hole?

After paying your out of pocket costs, you leave the donut hole and then reach the catastrophic coverage. At this stage, you pay significantly lower copays or coinsurance for your covered drugs for the remainder of the year.

The out-of-pocket costs that help you reach the Catastrophic Coverage include:

Your deductible
What you paid during the initial coverage period
Almost the full cost of brand-name drugs (including the manufacturer’s discount) purchased during the coverage gap
Amounts paid by others, including family members, most charities, and other persons on your behalf
Amounts paid by State Pharmaceutical Assistance Programs (SPAPs), AIDS Drug Assistance Programs, and the Indian Health Service

Costs that do not help you reach catastrophic coverage include:

monthly premiums
the cost of non-covered drugs
the cost of covered drugs from pharmacies outside your plan’s network
the 75% generic discount.

During catastrophic coverage, you will pay 5% of the cost for each of your drugs, or $3.60 for generics and $8.95 for brand-name drugs (whichever is greater).

Your Part D plan should keep track of how much money you have spent out of pocket for covered drugs and your progression through coverage periods and this information should appear in your monthly statements.

Note: If you have Extra Help, you do not have a coverage gap. You will pay different drug costs during the year. Your drug costs may also be different if you are enrolled in an SPAP.

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