You might have heard about the 'donut hole' in Medicare PDP plans. What is it? Should you be concerned? Is it still there or has it 'closed' for good? This article answers these common questions.

Coverage gap aka ‘Donut Hole’

Effective 2020, what used to be called the 'donut hole' or gap in prescription drug coverage has practically disappeared.

Popularly known as the ‘donut hole', there was a gap in coverage in Medicare Part D where you ended up paying substantially more for your drugs (plan stopped paying and you bore all the costs after discounts and subsidies). Medicare kept reducing the “substantially more” costs every year so that effective 2020 the 'donut hole' has closed and you will only pay 25% of the costs of your drugs (both brand-name and generic, plus upto $3 pharmacy dispensing fee) until you reach the yearly out-of-pocket limit.

If you got Extra Help, you may not have been impacted by the ‘donut hole’.

Before, you would have entered the coverage gap once you and your plan had exhausted the Initial Coverage limit. Once there, you would have paid substantially more out-of-pocket for your prescriptions till your spend had reached the out-of-pocket threshold and hit Catastrophic Coverage level.

Now, this is what you will pay out-of-pocket for standard Part D coverage (during 2020):

• Annual deductible of $435
• Initial Coverage Period - 25% of the cost of covered drugs, upto $4,020 (including deductible)
• Coverage Gap aka Donut Hole - 25% of the cost of covered brand name and generic drugs (same as Initial Coverage Period, plus upto $3 pharmacy dispensing fee), upto out-of-pocket threshold ($6,350 including deductible)
• Beyond out-of-pocket threshold - 5% of a drug's cost (or $3.60 for a generic and $8.95 for a brand name drug, whichever is greater). This is also called Catastrophic Coverage.

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