If the average retail cost of
your formulary medications is over
$335 each month, and your drug plan has a standard
Initial Coverage Limit
of $4,020, you will enter the Donut Hole some time during 2020.
You enter the Donut Hole or Coverage Gap based on the retail value of your formulary drug purchases.
You will enter your Medicare Part D prescription drug plan's Donut
Hole or Coverage Gap if the total retail value of your formulary prescription
purchases exceeds your plan's
Initial Coverage Limit -- and most 2020 Medicare Part D plans (PDPs and MAPDs) use the standard
Initial Coverage Limit
of $4,020. This means when the total retail cost of your drug purchases exceeds $4,020, you enter the 2020 Donut Hole (not what you pay for drugs, but the retail value of formulary drugs).
You can read more in our article: "
Understanding the 2020 Medicare Part D Donut Hole".
Example: You purchase only one formulary medication per month that has a $375 retail value and your plan provides coverage for the drug with a $47 co-pay.
If you use just one formulary medication that has a retail cost of $375 and you pay only a $47 co-pay with your Medicare Part D plan (assuming a brand name, Tier 3 drug), your Medicare plan will pay the remaining $328 ($375 - $47), but the total retail cost of $375 counts toward meeting your $4,020 Initial Coverage Limit.
The $47 that you spend out-of-pocket for the formulary drug counts toward your total out-of-pocket annual drug spending limit (
TrOOP) or the amount you spend before exiting the Donut Hole and entering your plan's
Catastrophic Coverage phase.
So if your average monthly retail drug costs are $375, you will enter the 2020 Donut Hole or Coverage Gap in late November - and your Donut Hole coverage cost will increase to $94 per month (based on the
25% Donut Hole discount). See our chart below to estimate when you enter the Donut Hole based on your retail drug costs.
How does "Retail Drug Cost" Compare to "Your Actual out-of-pocket Drug Cost"
Retail drug costs are not what you actually spend out-of-pocket for your prescriptions. Instead, retail cost is what you spend
- plus what your Medicare Part D plan pays (or others pay on your behalf). Using the example above, your plan's negotiated retail price is $375, but your actual out-of-pocket drug cost is a $47 co-pay.
Unfortunately, your Medicare plan's monthly
Explanation of Benefits (EOB) letter
does not state "Retail Drug Cost", but instead, your EOB will show two different columns with: "Plan Paid" and "You Paid" - when these two columns are added together, the sum is your Medicare drug plan's negotiated retail drug cost.
Review: "Lesser-of" rule used when your plan's cost-sharing is more than the drug's retail price
If the retail price of your formulary medication is less than your co-payment, you will pay the retail price and not the higher co-payment - based on the "
lesser of" rule (you always pay the lesser of the retail cost or co-pay).
For example, if you are purchasing a Tier 3 generic medication with a $40 retail cost and the co-pay is $47, you will pay the $40 retail cost - and not the higher $47 co-pay.
Bottom line:
You never pay more than your Medicare plan's negotiated retail drug price.
Where can you see retail drug price information?
Your Medicare plan should have an online tool that shows you the most current retail price information for your formulary drugs - you can call your plan for more information about retail drug prices. The Medicare Plan Finder (MyMedicare.gov) also shows the plan's retail drug prices. You can also telephone a Medicare representative (1-800-Medicare) for retail drug price information.
Both
our
Formulary Browser (showing all drugs
for a single Medicare plan) and our
Drug Finder (showing all Medicare
plans covering a single drug) include CMS formulary data and average retail pricing information.
For more information, our
Retail Drug Pricing Detail pages show the pricing history for each medication (when available). As noted, our retail drug pricing information is the average price across all pharmacies in a specific region and actual retail drug costs can vary slightly at your specific pharmacy.
Entering the 2020 Donut Hole as compared to the 2019 Donut Hole
The good news: If retail costs of your prescription have not changed since 2019 (which is unlikely), the 2020 Donut Hole or Coverage Gap should start just slightly
later since the 2020 Initial Coverage Limit ($4,020) is slightly higher than the 2019 Initial Coverage Limit of $3,820.
In other words, you will be able to purchase slightly more prescriptions before entering the 2020 Donut Hole as compared to 2019.
Example of how entering the Donut Hole changes over the years.
If your average monthly retail medication costs were $400 in 2016, you entered the 2016 Donut Hole in early-September 2016. However, if your costs remained the same the next year, you entered the 2017 Donut Hole sometime in early-October 2017. Based on the same $400 average monthly retail drug cost, you entered the 2018 Donut Hole mid-October and you entered the 2019 Donut Hole late-October. In 2020, you would enter the Donut Hole in early-November.
More good news: No Donut Hole for Medicare beneficiaries with Extra Help
If you receive Medicare Part D
Extra Help or Low-Income Subsidy (LIS), then you will
never enter the 2020 Donut Hole and the cost of your prescriptions will remain constant until you reach the Catastrophic Coverage portion of your Medicare Part D plan where your drug costs may actually be reduced depending on your
financial resources.
And if you are qualified for your state's Medicaid program, you are automatically qualified for Extra Help.
If you are purchasing Medicare Part D drugs with a retail cost of over $335 per month, when will you enter the 2020 Donut Hole or Coverage Gap?
The chart below shows the average retail drug costs that would cause you to enter the
Coverage Gap or Donut Hole for any given month.
Minimum
Average Monthly Retail Drug Cost
Causing You to Enter the Donut Hole in a
Given Month
|
You will enter
the Donut Hole in . . .
|
If your 2020
monthly retail drug
costs are over . . .
|
If your 2019
monthly retail drug
costs are over . . .
|
If your 2018
monthly retail drug
costs are over . . .
|
If your 2017
monthly retail drug
costs are over . . .
|
If your 2016
monthly retail drug
costs are over . . . |
January |
$4,020 |
$3,820 |
$3,750 |
$3,700 |
$3,310 |
February |
$2,010 |
$1,910 |
$1,875 |
$1,850 |
$1,655 |
March |
$1,340 |
$1,274 |
$1,250 |
$1,234 |
$1,104 |
April |
$1,005 |
$955 |
$938 |
$925 |
$828 |
May |
$804 |
$764 |
$750 |
$740 |
$662 |
June |
$670 |
$637 |
$625 |
$617 |
$552 |
July |
$575 |
$546 |
$536 |
$529 |
$473 |
August |
$503 |
$478 |
$469 |
$463 |
$414 |
September |
$447 |
$425 |
$417 |
$412 |
$368 |
October |
$402 |
$382 |
$375 |
$370 |
$331 |
November |
$366 |
$348 |
$341 |
$337 |
$301 |
December |
$335 |
$319 |
$313 |
$309 |
$276 |
And here is how some of these retail drug costs would look in a chart . . .
Bottom line: If the retail cost of your medications averages
over $335 each month -- and you are not eligible for Extra Help -- you will enter the Donut Hole some time during 2020.
Entering the Donut Hole and the 2020 Donut Hole Discount
If you are entering the 2020 Donut Hole, you will pay 25% of retail for brand drugs and 25% of retail for generic drugs. For more information, please also see our article:
"
The 2020 Donut Hole Discount increases (... and what this means to you)"
Using our earlier example, if you are using a brand-name drug with a retail cost of $375, and you enter the Donut Hole, you would receive the brand name Donut Hole discount and pay 25% of retail or $94 (and so yes, even though considered "closed", coverage in the Donut Hole is costing you more than your $47 co-pay from your Initial Coverage Phase).
Estimating your Medicare Part D plan spending with our Donut Hole Calculator
You can also use our 2020 Donut Hole Calculator or
PDP-Planner to get an idea of how you can budget for 2020 drug costs.
The following link shows an example of a person with retail brand-name drug costs totaling $800 per month:
https://q1medicare.com/PartD-PartDCoverageGapCalculator2020.php?pgtype=ex1 (as noted below, you can adjust the example and drug mix to estimate your actual out-of-pocket costs).
(
Spoiler Alert: If your average retail drug cost are $800 per month, and you use only brand-name drugs, you enter the 2020 Donut Hole in May, exit into
Catastrophic Coverage in October, and have out-of-pocket drug costs of around $2,667 per year.)
If you wish, you can change
the $800 value in our example to your own prescription spending - change the deductible (which is set at $0 Initial Deductible by default) - and choose your mix of generic or brand-name drugs) to see a preview of your own 2020 Medicare Part D drug coverage.
Still not sure what all these numbers mean to you? Click here and let us know.