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When do I need coverage in the Donut Hole (or Coverage Gap)?

The Donut Hole or Coverage Gap is the portion of the Medicare Part D plan where, after a certain point, the Medicare beneficiary is 100% responsible for the costs of the medication (less the Donut Hole Discount).

In the 2020 Medicare Part D Plans, the coverage gap starts when the retail cost of the medications reaches $4020 and continues until the retail cost of the medication reaches $9038.75 (which is when you have spent $6350 in out of pocket costs for your medications). Please Note: The monthly retail cost of your medication may be available from your local pharmacist.

You can, therefore, calculate whether and when you go into the Coverage Gap by simply working with your estimated average monthly expenses.

For example, if you spend approximately $300 per month retail, you could expect to enter the Donut Hole in October: $4020 / $300 = 13.4 months into the calendar year or October.

You will therefore have 2.5 Months (12 months - 9.5 months ) during which you would be responsible for 100% of your medication costs - that is you will pay the full $300 per month yourself.

To determine if donut whole coverage is worth while, you need to take a look at the extra premium paid for the Donut Hole coverage as compared to the money saved in medication costs. (Please also note the many plans only cover generics in the donut hole!)

If the monthly premium costs of a Medicare Part D plan with Donut Hole coverage costs $30 more per month than a Medicare Part D plan without Donut Hole coverage (or an additional $360 more per year), and your monthly medications costs using the plan would be $100 co-pay per month instead of the $300 in retail costs, the calculation would be as follows.

You would be saving $200 a month on your medication costs ($300 - $100), for the 4 months that you would be in the Donut Hole for a total savings of $800 - which is in excess of the additional $360 premium cost for Donut Hole coverage. Therefore, in our example, the prescription drug cost savings will justify the additional monthly premiums.

Please note: in some cases, you will actually come out of the Donut Hole into the area of "Catastrophic Coverage". For example, if you have retail medication costs of $600 per month you go into the Donut Hole in May ($4020 / $600 = $6.7) and pay 100% of your medication costs until you come out of the Donut Hole in mid-November ($9038.75 / $600 = 15.06). The remainder of the year (from mid-November through December) you will fall under Catastrophic Coverage.

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