Your $6,350 total out-of-pocket spending limit
only includes the portion of your $4,020
Initial Coverage Limit
that you actually
paid. The portion of your medication costs paid by your Medicare Part D plan do not count toward your
For example, if you buy a formulary drug with a $100 retail cost during the Initial Coverage Phase and you pay $25 (your plan pays $75), the $100 retail cost counts toward reaching your $4,020 Initial Coverage Limit and only the $25 you spend counts toward meeting your $6,350 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?
What you spend on Medicare Part D drugs 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, $435 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 2020 is $4,020)
- 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 10% generic and 90% 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 2020 Medicare Part D plan has:
- a standard $435 Initial Deductible,
- an Initial Coverage Limit of $4,020,
- 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 90% brand drugs and 10% generics in the Donut Hole - just as Medicare predicts.
Using this information, your estimated total out-of-pocket cost before exiting the 2020 Donut Hole would be around $2,756
. (You spend $435 in the Initial Deductible, $896 in the Initial Coverage Phase, and $1,425 in the Donut Hole.)
Following this example, you will notice that this $2,756
out-of-pocket figure is far lower than your plan's $6,350
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 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 $6,350 TrOOP (you can
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So, in our example, your out-of-pocket costs are $2,756
, plus the drug manufacturer has paid around $3,594
toward your brand-name Donut Hole discount, and added together, brings you to your plan's TrOOP limit of $6,350
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 $6,350 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 $6,350 TrOOP limit yourself. You will spend $435 in the Initial Deductible, $896.25 in the Initial Coverage Phase, and $5,018.75
in the Donut Hole.
If you are using 100% brand-name drugs in the Donut Hole . . .
You will pay $2,652 before exiting the Donut Hole.
If you are using 100% brand-name medications in the
Coverage Gap, you will personally spend about $2,652 out-of-pocket to exit the Donut Hole. You will spend $435 in the Initial Deductible, $896 in the Initial Coverage Phase, $1,321
in the Donut Hole, and the pharmaceutical manufacturer's portion of the brand-name discount would account for the remaining
Your Medicare plan's deductible and cost-sharing will also affect what you pay 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