95% of your brand-name drug's retail cost is counted toward exiting the 2016 Donut Hole.
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
Q1Medicare.com articles.