If the average retail cost of
your formulary medications is over
$345 each month, and your drug plan has a standard
Initial Coverage Limit of $4,130, you will enter the Donut Hole sometime during 2021.
Reminder: You enter the Donut Hole or Coverage Gap based on the retail value of your
formulary drug purchases.
You will enter your Medicare Part D prescription drug plan's Donut
Hole or Coverage Gap if the total retail value of your formulary prescription
purchases exceeds your plan's
Initial Coverage Limit -- and most 2021 Medicare Part D plans (PDPs and MAPDs) use the
standard
Initial Coverage Limit of $4,130.
This means when the total retail cost of your drug purchases exceeds $4,130, you enter the
2021 Donut Hole (not what you pay for drugs, but the retail value of formulary drugs).
You can read more in our article: "Understanding the 2021 Medicare Part D Donut Hole".
Question: If you are purchasing Medicare Part D drugs with a retail cost of over $345 per month,
when will you enter the
2021 Donut Hole or Coverage Gap?
The chart below shows the average retail drug costs that would cause you to enter the
Coverage Gap or Donut Hole for any given month.
Minimum
Average Monthly Retail Drug Cost |
|||||
---|---|---|---|---|---|
You will enter the Donut Hole in . . . |
If your 2021 monthly retail drug costs are over . . . |
If your 2020 monthly retail drug costs are over . . . |
If your 2019 monthly retail drug costs are over . . . |
If your 2018 monthly retail drug costs are over . . . |
If your 2017 monthly retail drug costs are over . . . |
January | $4,130 | $4,020 | $3,820 | $3,750 | $3,700 |
February | $2,065 | $2,010 | $1,910 | $1,875 | $1,850 |
March | $1,377 | $1,340 | $1,274 | $1,250 | $1,234 |
April | $1,033 | $1,005 | $955 | $938 | $925 |
May | $826 | $804 | $764 | $750 | $740 |
June | $689 | $670 | $637 | $625 | $617 |
July | $590 | $575 | $546 | $536 | $529 |
August | $517 | $503 | $478 | $469 | $463 |
September | $459 | $447 | $425 | $417 | $412 |
October | $413 | $402 | $382 | $375 | $370 |
November | $376 | $366 | $348 | $341 | $337 |
December | $345 | $335 | $319 | $313 | $309 |
And here is how some of these retail drug costs would look in a chart . . .
Question: But isn't the 2021 Donut Hole now closed?
Not exactly. Although we say that the Donut Hole "closed" in 2020 since you receive a 75% discount on all formulary drugs, you will still leave your Medicare Part D plan's Initial Coverage Phase once your retail drug costs exceed the Initial Coverage Limit. And when you leave your Initial Coverage Phase, you will enter the Coverage Gap
(Donut Hole) where the cost of your formulary medications can increase, decrease, or stay the same - depending on your Medicare drug plan, your cost-sharing, and the drug's retail price. You can click on our FAQ "Did the Coverage Gap or Donut Hole just close up and go away?" to read more.
Retail drug costs are not what you actually spend out-of-pocket for your prescriptions.
Instead, retail cost is what you spend - plus what your Medicare Part D plan
pays (or others pay on your behalf). Using the example above, your plan's negotiated
retail price is $375, but your actual out-of-pocket drug cost is a $47 co-pay.
Unfortunately, your Medicare plan's monthly
Explanation of Benefits (EOB) letter does not
state "Retail Drug Cost", but instead, your EOB will show two different columns
with: "Plan Paid" and "You Paid" - when these two columns are added together,
the sum is your Medicare drug plan's negotiated retail drug cost.
Review: "Lesser-of" rule used when your plan's cost-sharing is more than the
drug's retail price
If the retail price of your formulary medication is less than your co-payment,
you will pay the retail price and not the higher co-payment - based on the
"lesser of"
rule (you always pay the lesser of the retail cost or co-pay).
For example, if you are purchasing a Tier 3 generic medication with a $40 retail cost
and the co-pay is $47, you will pay the $40 retail cost - and not the higher $47 co-pay.
Bottom line:
You never pay more than your Medicare plan's negotiated retail drug price.
Question: Where can you see retail drug price information?
Your Medicare plan should have an online tool that shows you the most current retail price information for your formulary drugs - you can call your plan for more information about retail drug prices. The Medicare Plan Finder (MyMedicare.gov) also shows the plan's retail drug prices. You can also telephone a Medicare representative (1-800-Medicare) for retail drug price information.
Both
our Formulary Browser (showing all drugs
for a single Medicare plan) and
our Drug Finder
(showing all Medicare plans covering a single drug) include CMS formulary data and
average retail pricing information.
For more information, our
Retail Drug Pricing Detail pages show the pricing history for each medication (when available).
As noted, our retail drug pricing information is the average price across all pharmacies
in a specific region and actual retail drug costs can vary slightly at your specific pharmacy.
Entering the 2021 Donut Hole as compared to the 2020 Donut Hole
The good news: If retail costs of your prescription have not
changed since 2020 (which is unlikely), the 2021 Donut Hole or Coverage Gap should start
just slightly later since the 2021 Initial Coverage Limit
($4,130) is slightly higher than the
2020 Initial Coverage Limit of $4,020.
In other words, you will be able to purchase slightly more prescriptions before entering the
2021 Donut Hole as compared to 2020.
Example of how entering the Donut Hole changes over the years.
If your average monthly retail medication costs were $400 in 2016,
you entered the 2016 Donut Hole in early-September 2016.
However, if your costs remained the same the next year,
you entered the 2017 Donut Hole sometime in early-October 2017.
Based on the same $400 average monthly retail drug cost,
you entered the 2018
and 2019 Donut Holes in mid-October
and you entered the 2020 Donut Hole
early-November.
In 2021, you would enter the Donut Hole slightly later in early-November.
More good news: No Donut Hole for Medicare beneficiaries with Extra Help
If you receive Medicare Part D
Extra Help
or Low-Income Subsidy (LIS), then you will
never enter
the 2021 Donut Hole and the cost of your prescriptions will remain constant until you
reach the Catastrophic Coverage portion of your Medicare Part D plan where your drug costs
may be reduced depending on your
financial resources.
And if you are qualified for your state's Medicaid program, you are automatically qualified for Extra Help.
If you are entering the Donut Hole, you will pay 25% of retail for brand drugs and 25% of
retail for generic drugs.
Using our earlier example, if you are using a brand-name drug with a retail cost of $375,
and you enter the Donut Hole, you would receive the brand name Donut Hole discount and pay
25% of retail or $94 (and so yes, even though considered "closed", coverage in the
Donut Hole is costing you more than your $47 co-pay from your Initial Coverage phase).
Estimating your Medicare Part D plan spending with our
Donut Hole Calculator
You can also use our 2021 Donut Hole Calculator or
PDP-Planner/2021
to get an idea of how you can budget for 2021 drug costs.
The following link shows an example of a person with retail brand-name drug costs totaling
$800 per month:
https://q1medicare.com/PartD-PartDCoverageGapCalculator2021.php?pgtype=ex1
(as noted below, you can adjust the example and drug mix to estimate your actual
out-of-pocket costs).
(Spoiler Alert: If your average retail drug cost are $800 per month,
and you use only brand-name drugs, you enter the 2021 Donut Hole in June, exit into
Catastrophic Coverage
in December, and have out-of-pocket drug costs of around $2,731 per year.)