Archive: How much money could I possibly have saved when the Donut Hole Discount began back in 2011?

Around $1,920. 2011 marked the first year that you could receive a discount on medications purchased when you are in the Donut Hole (or Coverage Gap) portion of your Medicare Part D prescription drug plan. (As some people may recall, in 2010, you received a one-time $250 Medicare rebate check when you reached your 2010 Donut Hole.)

However, your actual savings in the 2011 Donut Hole depended on:

(1) how much you spent personally before reaching the Donut Hole and
(2) how much you spent on generic drugs or brand-name medications while in the Donut Hole.

When you reached the 2011 Donut Hole, you received a 7% discount on generic drugs and a 50% brand-name drugs discount - but, you also received full 100% retail cost credit for the brand-name drug purchases toward meeting your 2011 out-of-pocket threshold limit (or TrOOP) of $4,550.

So, if we assume: (1) that your 2011 Medicare Part D plan had a $0 initial deductible and (2) your plan had a standard or average 25% co-insurance cost-sharing structure (you pay around 25% of the retail drug price and the plan pays the remaining 75%), (3) you purchased only brand-name medications in the Donut Hole, and (4) you spent your way through your entire 2011 Coverage Gap or Donut Hole by meeting the $4,550 out-of-pocket (TrOOP) threshold - then, the maximum amount that you could have saved would be around $1,920 (or $3,840 * 50%).

Still not sure how we reached this number? Here is the "Medicare Donut Hole math", along with our assumptions:

Your 2011 Medicare Part D Initial Deductible: $0
The standard 2011 Initial Coverage Limit: $2,840 (total retail drug cost)
25% cost-sharing - so, of the $2,840, you pay (.25)($2,840) = $710
The remaining balance to reach the 2011 Donut Hole exit point of $4,550 is ($4,550 - $710) = $3,840
If you only purchase $3,840 in name-brand drugs you get the 50% Donut Hole discount, so you pay (.50)($3,840) = $1,920 --- but get credit for the full $3,840.

However, if you had a standard 2011 initial deductible of $310, then...

Your 2011 Medicare Part D Initial Deductible: $310
The standard 2011 Initial Coverage Limit: $2,840 (total retail drug cost) - ($310, the amount you already paid in the deductible) = $2,530
25% cost-sharing - so, of the ($2,840 - $310) = $2,530, you pay (.25)($2,530) = $632.50
The total you pay before reaching the Donut Hole: ($310 + $632.50) = $942.50
The remaining balance to reach the 2011 Donut Hole exit point of $4,550 is ($4,550 - $942.5) = $3,607.50
If you only purchase $3,607.50 in name-brand drugs you get the 50% Donut Hole discount, so you pay (.50)($3,607.50) = $1,803.85 --- but you get credit for the full $3,607.50.

Please note: If your Medicare Part D plan had a cost-sharing design lower than 25% (you paid less than $25 for a $100 drug purchase), then you saved even more money with the Donut Hole discount when you reached the Donut Hole or Coverage Gap, because you had more of your total out-of-pocket costs falling in the 2011 Donut Hole where you get the 50% Donut Hole discount.

You can click here to see how the Donut Hole discount increases over the next few years until the discount reaches 75% and the Donut Hole is considered “closed”.

You can click here for another first-year, 2011 Donut Hole discount example
on this site