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If I am in the 2018 Donut Hole and get a 65% discount on my brand-name drugs, what percent of my purchase counts toward exiting the Donut Hole?

Category: Donut Hole Discounts
Published: May, 31 2018 04:05:49

85% of your brand-name drug's retail cost is counted toward exiting the 2018 Donut Hole.

If your monthly purchases of formulary medications consistently have a retail value of over $313, you will exceed your Medicare Part D prescription drug plan's Initial Coverage Limit ($3,750 in 2018) and enter the Donut Hole portion of your Medicare plan.  Once you reach the Donut Hole or Coverage Gap, you will receive a discount on the retail prices of your brand-name and generic drug purchases.

So in 2018, once you reach the Donut Hole, your brand-name drug purchases will receive a 65% Donut Hole discount (you will pay 35% of retail) and 85% of the brand-name drug price will count toward meeting your true out-of-pocket threshold (TrOOP) or Donut Hole exit point of $5,000.

In general, with the brand-name Donut Hole discount, you will receive credit for the 50% brand-name drug manufacturer discount plus the portion of the prescription drug’s retail price you paid (35% in 2018) - but, you do not get credit toward TrOOP for the portion of the drug cost paid by your Medicare plan (15% in 2018).

So if you buy a brand-name medication with a $100 retail cost while in the 2018 Donut Hole, you pay $35 and get $85 credit toward exiting the Donut Hole or meeting the $5,000 out-of-pocket threshold.

Again, the additional 15% of the “discount” is paid by your Medicare Part D plan and therefore does NOT count toward exiting the Donut Hole or reaching your out-of-pocket costs (TrOOP).

In 2018, generic drug purchases receive a 56% Donut Hole discount (you pay 44% of retail) and your discounted generic drug cost counts toward meeting your 2018 true out-of-pocket threshold (TrOOP or total drug spend) of $5,000.  So if you purchase a generic medication with a retail value of $100 while in the 2018 Donut Hole, you will receive a 56% discount and pay $44. The $44 will then count toward meeting your 2018 TrOOP threshold of $5,000. 

Keep in mind that brand-name drug purchases actually get a larger discount and more of the drug's retail cost counts toward meeting your TrOOP - so it is possible that a brand-name medication may cost your less than a generic alternative - assuming that your Medicare Part D plan covers both the brand-name and the generic equivalent.

Please note, if the retail value of your monthly formulary medication purchases is consistently over $702, you will most likely exceed your Medicare Part D prescription drug plan's total out-of-pocket spending limit (TrOOP) ($5,000 in 2018) and enter the Catastrophic Coverage portion of your 2018 Medicare plan, where you will pay around 5% of the retail drug price for the remainder of the year.

You can read more about the Donut Hole Discount in our FAQs or in our Q1Medicare.com articles.

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