If I am in the Coverage Gap and get a 55% discount on brand-name drugs, how much of my purchase counts toward exiting the Donut Hole?
Archive: Donut Hole Discounts · published Jul 16, 2016
If your monthly purchases of formulary medications consistently have a retail value of over $276, you will exceed your Medicare Part D prescription drug plan's Initial Coverage Limit ($3,310 in 2016) and enter the Donut Hole portion of your Medicare plan. As is true since 2011, you will receive a discount on the retail prices of your brand-name and generic drug purchases.
Once you reach the Donut Hole, your brand-name drug purchases will receive a 55% Donut Hole discount in 2016 and 95% of the brand-name drug price will count toward meeting your true out-of-pocket threshold (TrOOP) of $4,850.
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 (45% in 2016) - but, you do not get credit toward TrOOP for the portion of the drug cost paid by your Medicare plan (5% in 2016).
So if you buy a brand-name medication with a $100 retail cost while in the 2016 Donut Hole, you pay $45 and get $95 toward exiting the Donut Hole or meeting the $4,850 out-of-pocket threshold.
Again, the additional 5% 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).
Generic drug purchases receive a 42% Donut Hole discount in 2016 and your discounted generic drug cost counts toward meeting your 2016 true out-of-pocket threshold (TrOOP or total drug spend) of $4,850. So if you purchase a generic medication with a retail value of $100 while in the 2016 Donut Hole, you will receive a 42% discount and pay $58. The $58 will then count toward meeting your 2016 TrOOP threshold of $4,850.
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.
If the retail value of your monthly formulary medication purchases is consistently over $627, you will most likely exceed your Medicare Part D prescription drug plan's total out-of-pocket spending limit (TrOOP) ($4,850 in 2016) and enter the Catastrophic Coverage portion of your 2016 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 on this site articles.