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Do I just pay the difference between the $5,100 TrOOP and my Medicare Part D plan's $3,820 Initial Coverage Limit before exiting the 2019 Donut Hole?

Category: The Donut Hole or Coverage Gap
Published on 2019-08-18 14:12:38


No.  Your $5,100 total out-of-pocket spending limit (2019 TrOOP) only includes the portion of your $3,820 Initial Coverage Limit that you actually paid. The portion paid for your medications by your Medicare Part D plan does not count toward your $5,100 TrOOP.

For example, if you buy a formulary drug during your Initial Coverage Phase with a $100 retail cost and you pay $25 (your plan pays $75), the $100 retail cost counts toward reaching your $3,820 Initial Coverage Limit and only the $25 you spend counts toward meeting your $5,100 TrOOP.

Therefore, you cannot simply subtract the Initial Coverage Limit from your TrOOP to determine how much you will need to spend before leaving the Donut Hole.

So how much will I personally spend before I exit the Part D Donut Hole?

It depends.  What you spend on Medicare Part D coverage before exiting the Coverage Gap or Donut Hole and entering Catastrophic Coverage will depend on several things including:
  • Whether your drug plan's has an Initial Deductible (for example, $415 or $0)
  • Your plan's cost-sharing (what you pay for drugs, for example 25% of retail or a fixed co-pay of $30)
  • Your plan's Initial Coverage Limit (the standard for 2019 is $3,820)
  • Your mix of generic and brand-name drugs purchased while in the Donut Hole (Based on overall Part D drug purchases, Medicare predicts that people will use a mix of  about 11% generic and 89% brand-name drugs purchased in the Donut Hole)
  • Whether your plan provides any additional coverage while you are in the Donut Hole
For example, assuming that your 2019 Medicare Part D plan has:
  • a standard $415 Initial Deductible,
  • an Initial Coverage Limit of $3,820,
  • fixed cost-sharing of 25% co-insurance (you pay 25% of retail for all formulary drugs),
  • no additional plan coverage in the Donut Hole,
  • and you purchase 89% brand drugs and 11% generics in the Donut Hole - just as Medicare predicts.
Using this information, your estimated total out-of-pocket cost before exiting the 2019 Donut Hole would be around  $2,400.  (You spend $415 in the Initial Deductible, $851 in the Initial Coverage Phase, and $1,134 in the Donut Hole.)

Following this example, you will notice that this $2,400 out-of-pocket figure is far lower than your plan's $5,100 TrOOP threshold, and this difference is because your total out-of-pocket spending limit (TrOOP) includes what you spend plus any money that someone has paid on your behalf - and the 70% portion of your 75% brand-name drug Donut Hole discount was paid by the pharmaceutical industry.

So when you purchase brand-name drugs in the Donut Hole you would receive a 75% Donut Hole discount on these drugs and also receive 95% of the retail drug price as credit toward reaching TrOOP.  This means that, if you purchase a brand-name drug with a retail cost of $100, you would pay $25 (with your discount) and get credit for $95 (the $25 you pay plus the $70 paid by the pharmaceutical manufacturer) toward your $5,100 TrOOP (you can click here to read more).

So, in our example, your out-of-pocket costs are $2,400, plus the drug manufacturer has paid around $2,700 toward your brand-name Donut Hole discount, and added together, brings you to your plan's TrOOP limit of $5,100.


How does your total out-of-pocket cost change based your mix of generic and brand-name formulary drugs?


If you are using 100% generics in the Donut Hole . . .

You will pay $5,100 before exiting the Donut Hole.
  Following the same example above, if you are using 100% generics while in the Donut Hole, you can expect to meet the $5,100 TrOOP limit yourself.  You will spend $415 in the Initial Deductible, $851 in the Initial Coverage Phase, and $3,834 in the Donut Hole.


If you are using 100%
brand-name drugs in the Donut Hole . . .

You will pay $2,272 before exiting the Donut Hole.  If you are using 100% brand-name medications in the Coverage Gap, you will personally spend about $2,272 out-of-pocket to exit the Donut Hole.  You will spend $415 in the Initial Deductible, $851 in the Initial Coverage Phase, $1,006 in the Donut Hole, and the pharmaceutical manufacturer's portion of the brand-name discount would account for the remaining $2,828.


Your Medicare plan's deductible and cost-sharing will also affect what you before exiting the Donut Hole.


Also, depending on your chosen Medicare Part D plan's deductible and cost-sharing, you may pay slightly more out-of-pocket before exiting the Donut Hole, (for example, you have a $0 deductible or cost-sharing other than 25% of retail).


Need some help with the math?  You can use our Donut Hole Calculator to determine your out-of-pocket costs.

You can use our PDP-Planner or Donut Hole calculator to estimate your total annual out-of-pocket costs based on your mix of generic and brand drugs or deductible..  Here is an example to get you started: https://q1medicare.com/PartD-DoughnutHoleCalculatorsDonutHole.php?pgtype=ex1








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