The Donut Hole

Disclaimer: The information about the donut hole varies according to Part D plans. The amounts listed are based on 2017 numbers.

 

What is the "donut hole?"

The donut hole is a gap in coverage for people who have Medicare Part D. Medicare Part D plans pay for medications. Each plan has different coverage.  

 

History of the Donut Hole

Before the 2010 Affordable Care Act (ObamaCare) patients would have to pay 100% of medication costs during the "donut hole." In 2011 the amount patients were required to pay started being reduced as part of the ACA. By 2020 patients will have to pay a maximum of 25% of medication costs during the coverage gap. The financial burden is being lifted from patients and gifted to drug manufacturers.  

 

When does it apply?

Once a patient and their drug plan have spent a combined total of $3700 on medications, the "donut hole" begins.

Some drug plans have a deductible. A deductible means a patient pays the entire price until a certain amount is reached. After a deductible is met or if there is no deductible, the initial coverage starts. During the initial coverage, the patient and their Part D drug plan share the cost of medications up to $3700.  

The donut hole, a gap in coverage, starts after the 3,701st dollar is spent.  During the donut hole coverage is limited. Most of the time a patient can expect to pay 40% for brand-name drugs and 51% for generic medications (Kreis, 2017). This limited coverage lasts until the patient has reached an out of pocket expense of $4,950, for medicines.  

If a patient's prescription drug cost extends past the $4,950 the next phase is called catastrophic coverage. Catastrophic coverage requires a smaller co-pay for the rest of the calendar year.  

 

Are there different rules for name-brand prescriptions vs. generic drugs?

Yes. Thanks to the Affordable Care Act, drug manufacturers are required to give "discounts" for name-brand drugs for people in the coverage gap. Pharmacies charge a "dispensing fee" which factors into costs. Dispensing fees are not part of the "discount." Ordering a 90-day supply of medications from a mail-order pharmacy usually costs less because the reduced dispensing fee

 

Is there anything else I should know?

1. Each year Medicare changes the amount of money spent for the donut hole to start, as well as the percentages. Check with Medicare or the individual Part D plans for details. The numbers in this article are taken from the 2017 amounts listed on the Medicare.gov website.  

2. Medicare participants are allowed to change plans every year. Even though people don’t always know what each year will bring in health care costs, chronic disease is a good way to estimate.  

 

What can I do to help reduce my medication costs?

Part D recipients have several options if they are likely to go into the donut hole.  

  • Contact a Licensed Insurance Agent to help find the best prescription plan. Call Karen Cooper at 505-220-9005 with Med Care Senior Insurance Solutions. Med Care Senior Insurance Solutions is a free service to aid patients in finding the best Medicare plans to fit each individual's needs.
  • Get a secondary insurance or Medigap policy. Usually, secondary insurances will cover a percentage, if not all, of your co-pays and deductibles. If you can afford a secondary insurance, this is a great solution for a variety of healthcare needs. AARP has a variety of Medicare supplement plans to best fit each person’s needs.  
  • Check with Medicare to see if you qualify for Extra Help. Extra help is available through each state Medicaid or State Health Insurance Program (SHIP). People might automatically qualify if they a.) Already have Medicaid b.) get help with Medicare Part B premiums, or c.) get Social Security benefits.

 

References

Kreis, D. (2017). What Is the Medicare Coverage Gap, or “Donut Hole”?. Retrieved from https://medicare.com/medicare-part-d/what-is-the-medicare-donut-hole/

Paying Less for Drugs in the Part D 'Doughnut Hole'. (2014). Retrieved from http://www.aarp.org/health/medicare-insurance/info-01-2011/ask_ms_medicare_question_92.html

What Is the Medicare Coverage Gap, or “Donut Hole”. (2002). Retrieved from https://medicare.com/medicare-part-d/what-is-the-medicare-donut-hole/

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