Coverage gap aka 'Donut Hole'
You might have heard about the 'donut hole' in Medicare PDP plans. What is it? How will you be impacted? What is the government doing about it? This article answers these common questions.
Coverage gap aka ‘Donut Hole’
Popularly known as the ‘donut hole', there is the gap in coverage in Medicare Part D where you end up paying substantially more for your drugs (plan stops paying and you bear all the costs after discounts and subsidies). Medicare plans to keep reducing the “substantially more” costs every year so that by 2020 the 'donut hole' will close and you will only pay 25% of the costs of your drugs (both brand-name and generic) until you reach the yearly out-of-pocket limit. For brand-name drugs this will happen in 2019 itself.
If you get Extra Help, you may not be impacted by the ‘donut hole’.
You enter the coverage gap once you and your plan have spent a combined $3,820 (in 2019 for standard structure plans) on your covered drugs. Once there, you pay substantially more out-of-pocket for your prescriptions till your spend reaches the threshold of $5,100 (in 2019 for standard structure plans). After the threshold is reached, your costs go down dramatically and in 2019 you will only pay 5% of a drug's cost (or $3.40 for a generic and $8.50 for a brand name drug, whichever is greater).
This is what “substantially more” means during 2019:
- For covered brand name drugs, you will usually pay 25% of the cost, and a dispensing fee, with the rest picked up through a 70% Manufacturer discount and 5% plan discount or subsidy. What you pay, as well as the manufacturer's discount, both count towards your out-of-pocket costs. This effectively closes the Donut Hole for brand-name drugs.
- For generic drugs, you will pay 37% of the cost and a dispensing fee. Rest is picked up by Medicare through discounts or subsidies. Only what you pay is counted towards your out-of-pocket costs.
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