Powered by Q1Group LLC
Education and Decision Support Tools for the Medicare Community
  • ☰ MENU
  • Home
  • Contact
  • MAPD
  • PDP
  • 2019
  • FAQs
  • Articles
  • Contact
  • 2019
  • FAQs
  • Articles
  • Latest Medicare News

Do I just pay the difference between the $5,000 TrOOP and my Medicare Part D plan's $3,750 Initial Coverage Limit before exiting the 2018 Donut Hole?


Article 4 of 45 in this Category
Prev   Next

Do I just pay the difference between the $5,000 TrOOP and my Medicare Part D plan's $3,750 Initial Coverage Limit before exiting the 2018 Donut Hole?
Published on 2018-05-31 16:50:05
Category: The Donut Hole or Coverage Gap


No.  Your $5,000 total out-of-pocket spending limit (2018 TrOOP) only includes the portion of your $3,750 Initial Coverage Limit that you actually paid. The portion paid by your Medicare Part D plan for your medications does not count toward your $5,000 TrOOP.  Therefore, you cannot simply subtract the two numbers to determine how much you will need to spend before leaving the Donut Hole.

Assuming that your 2018 Medicare Part D plan has a standard $405 Initial Deductible, an Initial Coverage Limit of $3,750, and your cost-sharing is 25% co-insurance (you pay 25% of retail for your formulary drugs) -- you can estimate that your out-of-pocket cost within the 2018 Donut Hole would be around $3,759 - this number is including any money that someone has paid for you - for example the portion of your Donut Hole discount paid by the pharmaceutical industry.

If you are using 100% generics while in the Donut Hole, you can expect to personally pay this $3,759 figure.  If you are only using brand-name medications in the Coverage Gap, you will personally spend about $1,548 and the pharmaceutical manufacturer would account for the remaining $2,211.  Also, depending on your chosen Medicare Part D plan you may pay slightly more (for example, you have a $0 deductible or cost-sharing other than 25% of retail) - you can scroll down the page to see how the $3,759 is calculated.
Here is a bit of background when considering the Coverage Gap:
  • The Initial Coverage Limit (ICL) -- $3,750 in 2018, is used to calculate when you enter the Coverage Gap - and this is the retail value of your formulary drug purchases - not what you paid, but the retail value.

  • You will stay in the 2018 Donut Hole until your total out-of-pocket spending (not including monthly plan premiums) exceeds the $5,000 out-of-pocket threshold (TrOOP) - what you actually pay plus what anyone pays on your behalf (as noted below, this includes the pharmaceutical manufacturer Donut Hole discount). 

  • You get credit toward the $5,000 TrOOP for the 50% drug manufacturer's portion of the 65% brand-name drug discount you receive while in the Donut Hole (you can click here to read more).  In other words, you pay 35% of the brand-name drug's retail cost, but receive credit for 85% of the cost toward reaching the TrOOP limit - so for a $200 drug, you pay $70 and get $170credit toward meeting your TrOOP.
We use two different (but related) numbers to define your Medicare Part D drug plan’s Donut Hole or Coverage Gap:

(1) Your Donut Hole entry point or your Initial Coverage Limit (ICL): The 2018 Initial Coverage Limit is $3,750.  This is the total retail value of your drug purchases before entering the Donut Hole - so the $3,750 includes what you have spent on medications plus what your Medicare plan has contributed toward your medications and determines when you enter the Donut Hole.  Again, when the total retail cost of your drug purchases exceeds $3,750, you go into the 2018 Donut Hole.

For example, if you are in your Medicare Part D plan’s Initial Coverage Phase and purchase a medication with a $100 retail cost, and only pay a $30 co-payment out of your own pocket (your plan pays the other $70), the total $100 counts toward your $3,750 Initial Coverage Limit.

(2) Your Donut Hole exit point or Total out-of-pocket (TrOOP) spending: After your actual spending for covered medications has reached $5,000, you exit the 2018 Donut Hole.  Although you receive a 65% brand-name discount count in 2018, only the portion paid by you, and the portion paid by the brand-name drug manufacturer (50%) count toward meeting the total out-of-pocket spending amount. The additional 15% brand-name drug discount paid by your plan and the 56% generic drug discount paid by your plan do not count toward TrOOP.

Using the example above:  If you are in your Medicare Part D plan’s Initial Coverage Phase and purchase a medication with a $100 retail cost, and you pay a $30 co-payment out of your own pocket (the plan pays the other $70), you get $30 credit toward the $5,000 Donut Hole exit point.  So, the $100 retail cost counts toward your $3,750 Initial Coverage Limit (or Donut Hole entry point) but only the $30 that you actually paid for the formulary drug is credited toward TrOOP (or Donut Hole exit point) --You do not get credit toward exiting the Donut Hole for any portion of the retail drug cost paid by your Medicare Part D plan.

And, if you are in your Medicare Part D plan’s Coverage Gap and purchase a brand-name medication with a $100 retail cost, you receive the Donut Hole discount of 65% and only pay $35 out of your own pocket, but you get $85 credit toward the $5,000 Donut Hole exit point (the 35% you paid, plus the 50% paid by the pharmaceutical manufacturer).

If the $100 medication you purchased in the Donut Hole was a generic drug, you would pay $44 dollars (receive a Donut Hole discount of 56%) and you would get $44 credit toward meeting the $5,000 Donut Hole exit point or out-of-pocket threshold (the actual amount you spent).

When you purchase a formulary medication
with a $200 retail cost and a $30 co-pay in 2018
  Retail cost You pay Your
Medicare plan pays
Pharma Mfg pays Gov. pays Amount toward
your TrOOP
Initial Deductible * $200 $200 $0 $0 $0 $200
Initial Coverage Phase ** $200 $30 $170 $0 $0 $30
Coverage Gap - brand-name *** $200 $70 $30 $100 $0 $170
Coverage Gap - generic **** $200 $88 $112 $0 $0 $88
Catastrophic Coverage brand-name ***** $200 $10 $30 $0 $160 $10

* Retail Cost toward ICL
** $30 co-pay (Retail Cost toward ICL)
*** 65% Brand-Name Donut Hole Discount in 2018
**** 56% Generic Donut Hole Discount in 2018
***** 5% of retail or $8.35 for brand-name medications, whichever is higher (80% paid by Medicare, 15% paid by Medicare plan, and around 5% by plan member)

So how much can I expect to spend while I am in the 2018 Donut Hole?

Around $3,759 to $4,100
out-of-pocket. Once your reach the 2018 Donut Hole or Coverage Gap, the amount of money you actually need to spend out-of-pocket before entering Catastrophic Coverage will depend on your chosen Medicare Part D plan (PDP) or Medicare Advantage plan (MAPD).

A small piece of trivia: Based on past experience, Medicare expects you to purchase a combination of generic and brand drugs with a retail value of around $8,418 (and that you will use a mix of 90% brand-name drugs and 10% generics) before meeting your $5,000 limit - and exiting the Donut Hole.

Deductible Example 1 – you have the standard $405 deductible – and your drug cost is about 25% of retail.
If your Medicare drug plan follows the standardized or model Medicare Part D plan, you will first pay 100% of a $405 deductible. After the deductible, the remaining amount you will spend to reach the Initial Coverage Limit is $3,750 - $405 = $3,345 and you will pay 25% of this $3,345 total or $836.25. This means that, if your Medicare plan has an initial deductible of $405, you will pay the first $405 plus pay the $836.25 to reach the Donut Hole – for a total of $1,241.25.

Bottom Line: When you enter the 2018 Donut Hole, you will need to personally spend $5,000 – $1,241.25 or about $3,758.75 (rounded to $3,759) to exit the Donut Hole.

You enter the Donut Hole:
Total drug costs = $3,750
Total out-of-pocket costs = $1,241.25 (because of the initial deductible)

You exit the Donut Hole:
Total drug costs = about $8,418 (estimated by Medicare)
Total out-of-pocket costs = $5,000

Amount spent out-of-pocket while in the Donut Hole: about $3,759

Deductible Example 2 – you have a $0 deductible – and your drug cost is about 25% of retail.
If your Medicare Part D plan does not have the standard $405 initial deductible, but instead has the $0 deductible, you will actually pay slightly more in the Donut Hole before meeting your $5,000 TrOOP and exiting the Donut Hole. If you have a $0 initial deductible, you enter the 2018 Donut Hole when you have spent about $937.50 out-of-pocket, assuming your Medicare Part D plan does not have an initial deductible ($0 deductible) – in other words, you pay around 25% of $3,750 or $937.50. So when you enter the 2018 Donut Hole and your plan has a $0 deductible, you will need to personally spend $4,063 ($5,000 – $937.50) to exit the Donut Hole. Again this number is not “the total drug cost”, but what you actually spend to exit the Donut Hole.

You enter the Donut Hole
Total drug costs = $3,750
Total out-of-pocket costs = $937.50

You exit the Donut Hole
Total drug costs = about $8,418 (estimated by Medicare)
Total out-of-pocket costs = $5,000

Amount spent out-of-pocket while in the Donut Hole: about $4,063


Article 4 of 45 in this Category
Prev   Next




Advertisement

Medicare Supplements
fill the gaps in your
Original Medicare
1. Enter Your ZIP Code:
» Medicare Supplement FAQs

Advertisement

Browse News Categories
Selecting Your Medicare Plan
Star Ratings & Plan Quality
Annual Medicare Plan Changes
Enrollment Topics
Late Enrollment Penalty
Your Formulary (Drug List)
Monthly Formulary Changes
Your Medicare Plan Coverage
Pharmacies & Providers
Changing Medicare Plans
Special Enrollment Periods SEP
The Donut Hole or Coverage Gap
Donut Hole Discounts
Straddle Claims and High Costs
Out of Pocket: TrOOP and MOOP
Medicaid, LIS, & Extra Help
IRMAA - for Higher Incomes
Medicare Advantage Plans MAPD
Medicare Supplements - Medigap
Medicare Plan Providers
Marketing Medicare Products
General Medicare Part D PDP
General Medicare
Diabetes and Diabetic Coverage
Your Health & Wellness
About Q1Medicare.com


Pets are Family Too!
Use your drug discount card to save on medications for the entire family ‐ including your pets.

  • No enrollment fee and no limits on usage
  • Everyone in your household can use the same card, including your pets
Your drug discount card is available to you at no cost.




Advertisement




Tips & Disclaimers
  • The Medicare Advantage and Medicare Part D prescription drug plan data on our site comes directly from Medicare and is subject to change.
  • Medicare has neither reviewed nor endorsed the information on our site.
  • We provide our Q1Medicare.com site for educational purposes and strive to present unbiased and accurate information. However, Q1Medicare is not intended as a substitute for your lawyer, doctor, healthcare provider, financial advisor, or pharmacist. For more information on your Medicare coverage, please be sure to seek legal, medical, pharmaceutical, or financial advice from a licensed professional or telephone Medicare at 1-800-633-4227.
  • We are an independent education, research, and technology company. We are not affiliated with any Medicare plan, plan carrier, healthcare provider, or insurance company. We are not compensated for Medicare plan enrollments. We do not sell leads or share your personal information.
  • Benefits, formulary, pharmacy network, provider network, premium and/or co-payments/co-insurance may change on January 1 of each year. Our PDP-Compare.com and MA-Compare.com provide highlights of annual plan benefit changes.
  • The benefit information provided is a brief summary, not a complete description of benefits. For more information contact the plan.
  • Limitations, copayments, and restrictions may apply.
  • We make every effort to show all available Medicare Part D or Medicare Advantage plans in your service area. However, since our data is provided by Medicare, it is possible that this may not be a complete listing of plans available in your service area. For a complete listing please contact 1-800-MEDICARE (TTY users should call 1-877-486-2048), 24 hours a day/7 days a week or consult www.medicare.gov.
  • When enrolling in a Medicare Advantage plan, you must continue to pay your Medicare Part B premium.
  • Medicare beneficiaries with higher incomes may be required to pay both a Medicare Part B and Medicare Part D Income Related Monthly Adjustment Amount (IRMAA). Read more on IRMAA.
  • Medicare Advantage plans that include prescription drug coverage (MAPDs) are considered Medicare Part D plans and members with higher incomes may be subject to the Medicare Part D Income Related Monthly Adjustment Amount (IRMAA), just as members in stand-alone Part D plans. In certain situations, you can appeal IRMAA.
  • You must be enrolled in both Medicare Part A and Part B to enroll in a Medicare Advantage plan. Members may enroll in a Medicare Advantage plan only during specific times of the year. Contact the Medicare plan for more information.
  • If you are enrolled in a Medicare plan with Part D prescription drug coverage, you may be eligible for financial Extra Help to assist with the payment of your prescription drug premiums and drug purchases. To see if you qualify for Extra Help, call: 1-800-MEDICARE (1-800-633-4227). TTY users should call 1-877-486-2048, 24 hours a day/ 7 days a week or consult www.medicare.gov; the Social Security Office at 1-800-772-1213 between 7 a.m. and 7 p.m., Monday through Friday. TTY users should call, 1-800-325-0778; or your state Medicaid Office.
  • Medicare evaluates plans based on a 5-Star rating system. Star Ratings are calculated each year and may change from one year to the next.
  • A Medicare Advantage Private Fee-for-Service plan (PFFS) is not a Medicare supplement plan. Providers who do not contract with the plan are not required to see you except in an emergency.
  • Disclaimer for Institutional Special Needs Plan (SNP): This plan is available to anyone with Medicare who meets the Skilled Nursing Facility (SNF) level of care and resides in a nursing home.
  • Disclaimer for Dual Eligible (Medicare/Medicaid) Special Needs Plan (SNP): This plan is available to anyone who has both Medical Assistance from the State and Medicare. Premiums, co-pays, co-insurance, and deductibles may vary based on the level of Extra Help you receive. Please contact the plan for further details.
  • Disclaimer for Chronic Condition Special Needs Plan (SNP): This plan is available to anyone with Medicare who has been diagnosed with the plan specific Chronic Condition.
  • Medicare MSA Plans combine a high deductible Medicare Advantage Plan and a trust or custodial savings account (as defined and/or approved by the IRS). The plan deposits money from Medicare into the account. You can use this money to pay for your health care costs, but only Medicare-covered expenses count toward your deductible. The amount deposited is usually less than your deductible amount, so you generally have to pay out-of-pocket before your coverage begins.
  • Medicare MSA Plans do not cover prescription drugs. If you join a Medicare MSA Plan, you can also join any separate (stand-alone) Medicare Part D prescription drug plan
  • There are additional restrictions to join an MSA plan, and enrollment is generally for a full calendar year unless you meet certain exceptions. Those who disenroll during the calendar year will owe a portion of the account deposit back to the plan. Contact the plan provider for additional information.
  • Medicare beneficiaries may enroll through the CMS Medicare Online Enrollment Center located at www.medicare.gov.
  • Medicare beneficiaries can file a complaint with the Centers for Medicare & Medicaid Services by calling 1-800-MEDICARE 24 hours a day/7 days or using the medicare.gov site. Beneficiaries can appoint a representative by submitting CMS Form-1696.