When this occurs and your prescription purchase moves you between Medicare plan coverage phases, you will have a “straddle claim” and you will notice a difference in your drug cost as a portion of coverage will fall into two or more parts of your drug plan. In this example, the cost of your prescription medication purchase is split between your Initial Coverage Phase and your Donut Hole phase.
As a note, the negotiated retail cost of your medications determines when you reach the Initial Coverage Limit (ICL) -- and the ICL can change each year. The standard ICL for 2024 is $5,030. So when the negotiated retail cost of you medications is over $5,030, you will move into the Coverage Gap. (To see the Initial Coverage Limit for another year, you can use the link on this site.)
Once you exceed your Initial Coverage Limit, you will enter the Donut Hole portion of your Medicare Part D plan coverage and the remainder of your prescription purchase will be reduced by the Donut Hole discount.
How does this work? Example of a 2024 Straddle Claim:
First, a few assumptions for our example:
- Your Medicare Part D plan's negotiated retail price of your formulary drug: $1,000
- Your total accumulated retail drug costs before the $1,000 drug purchase: $4,910
- Your Medicare Part D plan has a standard $5,030 Initial Coverage Limit
- Your plan's coverage cost or copay for the $1,000 formulary drug: $100
First, you will need to spend $120 to meet the $5,030 Initial Coverage Limit ($5,030 - $4,910) - and you will pay $100 as a copay for your medication during this Initial Coverage phase.
2. The cost in the Donut Hole
Next, the balance of the retail cost or $880 ($1,000 - $120) will carry over to the next phase of your drug coverage or the Donut Hole where you will receive the 75% Donut Hole discount costing you $220 in the second portion of this straddle claim.
3. Your total cost for the $1,000 drug purchase in 2024
So together in 2024, you would pay $100 + $220 for a total cost of $320 for this drug.
Question: Can the Straddle Claim coverage cost of a single drug purchase exceed the drug's drug cost?
No. The total of your plan's cost-sharing plus the Donut Hole cost (not including the Donut Hole discount) cannot exceed the normal negotiated retail price of your medication -- as you never pay more than the negotiated retail price. Click here to see another example and further explanation of what happens when you buy a medication and the cost moves you into the Donut Hole portion of your Medicare Part D plan.
Follow up Question: So, if the total cost of one drug purchase takes my annual cost over my Medicare plan's coverage limit and into the Donut Hole, will I pay the copay for my drug plus the discounted cost that is over the coverage limit?
Yes. Please see our Frequently Asked Question on this site
Important Update:
2024 is the last year for the Coverage Gap or Donut Hole. Starting in 2025, the Donut Hole will be eliminated from Medicare Part D coverage.
Starting in 2025, the Inflation Reduction Act (IRA) eliminates the Coverage Gap (Donut Hole). In 2025 and beyond, Medicare Part D beneficiaries will stay in the Initial Coverage phase until their out-of-pocket spending for Part D formulary drugs (TrOOP) reaches the maximum out-of-pocket spending limit for Part D formulary drugs (RxMOOP) - which is set at $2,000 for 2025. After reaching RxMOOP, Medicare Part D beneficiaries will enter Catastrophic Coverage and have a $0 copay (no additional costs) for all formulary Medicare Part D drugs through the remainder of the year.
2025 Medicare Part D coverage
