Archive: I have a prescription with a retail cost of $1,894 and I have already purchased medications with a total retail cost of $930. If my Medicare Part D prescription drug plan has an Initial Coverage Limit of $2,600, will I pay the full retail price?

No. In this situation, you will pay your initial copayment (or cost sharing) for the $1,894 drug plus the difference of the retail amount that takes you into your plan's Donut Hole or Coverage Gap - less any applicable Donut Hole Discount applied to the balance of the purchase that falls into the Donut Hole.

As background, a prescription drug purchase that exceeds your Medicare prescription drug plan's Initial Coverage Limit and then crosses into the Coverage Gap or Donut Hole portion of your Medicare Part D plan is known as a "straddle claim" because it will cross to different phases of your Medicare Part D coverage.

Important Update: 2024 is the last year for the Coverage Gap or Donut Hole.

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.

The 2024 calculation:

Here is how we can estimate your 2024 straddle claim cost at the pharmacy:

Your plan's Initial Coverage Limit: $2,600
Your current balance in the Initial Coverage Phase: $930
What you have remaining before reaching the Donut Hole or Coverage Gap Phase: $1,670 ($2,600 - $930)
You purchase a brand-name drug with a retail cost of: $1,894
Your cost-sharing is 30% coinsurance for this drug during your Initial Coverage Phase
Your cost or Medicare Part D plan's cost-sharing amount for this portion of the purchase that occurs in the Initial Coverage phase (30% of the $1,670): $501
Your additional cost for the balance of the retail price that "straddles" or carries over into the Donut Hole or Coverage Gap is ($1,894 - $1,670): $224
You receive a 75% discount on all formulary drugs in the Donut Hole (so you pay 25% of the retail balance).
Your additional cost in the Donut Hole is 25% * $224: $56
Your total cost for this "straddle claim" purchase would be $501 + $56 = $557

And now for a little more detail...

Step #1 - Cost in the Initial Coverage Limit

In this example, the first $1,670 of your $1,894.70 drug purchase will still be in your Initial Coverage Phase and you will be charged only your normal Medicare Part D plan 30% coinsurance for the first $1,670 - or $501.

Step #2 - Cost in the Coverage Gap or Donut Hole

The second portion of your purchase, $224, falls into the Coverage Gap or Donut Hole and you will receive a 75% discount on this part of the purchase (or pay 25% of $224 = $56).

So - your entire purchase would then be calculated to what you paid in the Initial Coverage Phase plus what you pay in the Donut Hole or Coverage Gap: $501 + $56 = $557.

Please note that since this purchase was for a brand-name medication, you would get 95% credit of the $224 portion of the purchase toward exiting the Donut Hole (or your TrOOP limit $8,000 in 2024).

Click here if you wish to see the other Medicare Part D plan standard plan parameters since 2006 on this site

Click here if you wish to see how the Donut Hole Discount changes until 2020 on this site