What is the Donut Hole or Coverage Gap?
For instance, in plan year 2024, you may notice that your Medicare Part D plan will pay 75% of your generic medication costs in the Donut Hole and your brand-name drug purchases receive a 75% discount while in the Donut Hole. The brand-name drug manufacturer pays 70% and your Medicare Part D plan pays 5%.
Is the Coverage Gap the same as the Donut Hole?
Yes... The Donut Hole refers to your Medicare Part D plan's Coverage Gap. The Donut Hole or Coverage Gap is the phase of your prescription drug plan after the Initial Coverage Limit.The 2024 Donut Hole or Coverage Gap begins when the total retail costs of your prescription medication purchases exceeds $5,030 and the Donut Hole continues until your retail drug costs exceed $11,477.39 (again, this is for 2024 -- the Donut Hole limits change each year). The Donut Hole can also be said to end when your true out of pocket expense (or TrOOP) reaches $8,000. However, with the new Donut Hole Discount program, the discount you receive while in the Donut Hole is also counted toward your TrOOP. So, if you purchase a brand-name medication with a $100 retail value and get a 75% discount, you still get credit for the portion of the discount paid by the Pharmaceutical Industry (70% of retail), plus the percentage of the retail cost you paid and combined, this amount is credited toward your annual TrOOP (or Donut Hole exit point).
You will enter the Donut Hole or Coverage Gap portion of your Medicare Part D plan when the total "retail cost" of your
medication purchases exceeds your plan’s
Initial Coverage Limit.
This "retail cost" figure is a combination of what you pay for you your medications plus the portion paid by your Medicare Part D plan.
For example, if you buy a medication at your local pharmacy that has a retail cost of $100, you will pay your plan's copayment or cost-sharing, maybe $30, and your plan will pay $70 or the balance of the $100 retail cost. From this example purchase, the total retail cost of $100 is counted toward meeting your plan’s Initial Coverage Limit (ICL).
So once you have purchased medications with a retail value over your Medicare Part D plan's ICL, you enter your Medicare Part D plan’s Donut Hole.
Please remember that your Medicare Part D plan’s Initial Coverage Limit can change every year. You can
see how the Initial Coverage Limit has changed since 2006.
After you meet your Medicare Part D prescription drug plan's out of pocket spending limit (TrOOP), you will exit the Coverage Gap or Donut Hole phase of your Medicare plan
and enter the last phase of Medicare Part D coverage or Catastrophic Coverage.
For more, please see:
What exactly is TrOOP or True Out of Pocket costs?
Some people consider the Donut Hole as a second deductible before the plan's Catastrophic Coverage phase begins. In other words, the CMS or Medicare model standard Medicare Part D plan for 2024 has a $545 deductible (100% paid by the individual) and then 75% coverage from $546 until $5,030 (25% paid by the individual). Then, as noted, after $5,030, the individual pays again 100% up to $11,477.39 (minus the Donut Hole Discount they might receive). After purchasing medications with a retail value of $11,477.39, the individual will not have any out-of-pocket costs for formulary drug purchases through the end of the year.
Certainly, not every Medicare Part D prescription drug plan follows the CMS or Medicare standard defined model plan and some Medicare Part D plans provide additional coverage to close up the Donut Hole so that the individual would not face the out of pocket expenses in the Donut Hole (even when considering the Donut Hole Discount).
For example, some plans will provide coverage in the Donut Hole by using Generic Drugs with a copayment or alternatively, by using coverage of both Generic and Brand-Name Drugs with a different copayment for each. These types of plans will usually be available for a higher monthly premium and may not be available in all regions. Medications on such plans not covered during the Donut Hole may still receive the Donut Hole Discount. (For instance, you may have Tier 1 medications covered in the Donut Hole, but even though you will not have Donut Hole coverage on all formulary drugs, you will still receive the Donut Hole discount on the remaining Tier2, Tier 3, and Tier 4 formulary medications.)
Review your Explanation of Benefits. Each
month, your Medicare prescription drug plan will send you a printed
Explanation
of Benefits letter that will show you
how close you are to entering the Coverage Gap or Donut Hole portion of your
Medicare Part D plan.
Also notice when the price you pay for your medications changes. If you do not review your Explanation of Benefits letters,
you may
notice your entry into the Donut Hole because the cost of your medications has
increased (it could be the cost of one medication or all of your medications at once). Remember that with the
Donut Hole discount,
the additional Donut Hole cost may not be too great so some people already paying a high coinsurance may only notice a slight change in the price.
You can also calculate when you will enter the Donut Hole. You will be able to take your plan's Initial Coverage Limit
(for example, if your Initial Coverage Limit is
$5,030,
you can divide by 12 months. If your monthly retail drug costs are over this monthly amount (not what you spend with your Part D coverage,
but the actual retail value of your prescriptions), you will enter the Donut Hole sometime during the year. In our example, if you purchase
formulary medications with a retail value of over $419 per month, you will enter the
Donut Hole during this year.
And you can also our online Donut Hole Calculator. To help you visualize how far you are from the Coverage Gap, you can also try
our Donut Hole Calculator where you enter
the monthly retail value of your
medications and see a chart of your costs across the Part D coverage phases. Our Donut Hole Calculator can be found at:
PDP-Planner.com.
(The Donut Hole discount calculations can be found at the bottom of the chart.)