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When does a Medicare Part D beneficiary enter and exit the donut hole or coverage gap?

You enter the Donut Hole when the retail cost of your formulary drug purchases exceeds your plan's Initial Coverage Limit (ICL) and you exit your Medicare Part D drug plan's the Initial Coverage Phase and enter the Coverage Gap.  you will exit the Coverage Gap or Donut Hole when your out-of-pocket spending for formulary drugs exceeds your plan's Total out-of-pocket spending limit (TrOOP).

Entering the Donut Hole or Coverage Gap

A Medicare Part D beneficiary enters the  Donut Hole or Coverage Gap when their retail medication costs reach a certain amount or the Initial Coverage Limit.  The Initial Coverage Limit can change every year and in 2020, the Initial Coverage Limit for most Medicare drug plans is when a person's total retail drug costs total $4,020 (as a comparison, the value of the 2006 ICL was $2,250).

Can you enter the Donut Hole with a single drug purchase?

Yes.  Is is possible that one large drug purchase (or a multiple month drug purchase, such as a 90-day supply of an expensive drug) can actually move you from the Initial Coverage Phase into the Donut Hole and the cost of your medication may actually be spread over two or more phases of your Medicare drug plan as a "straddle claim".

In 2020, if you purchase a formulary drug with a retail cost of over $4,020, you will immediately be in the Coverage Gap.  In fact, if you purchase a 2020 formulary drug with a retail drug price of over $9,500, you will actually enter - and exit your Coverage Gap with a single drug purchase and then be in Catastrophic Coverage for the remainder of the year.

Comparing Retail Drug Prices to your Covered Drug Costs

As explained by United HealthCare, when you are enrolled in a Medicare Part D plan, there are actually two payments being made when you purchase a medication covered by your Medicare Part D plan:

(1) What you pay for a formulary drug or your discounted payment under the Part D plan (also know as the co-payment or co-insurance) and
(2) What your plan pays for the formulary drug or the balance of the retail cost being paid by your Part D insurance carrier.

Together, (1) your portion and (2) the insurance company portion add up to the total retail cost of the prescription.

Exiting the Coverage Gap and Entering Catastrophic Coverage

You leave the Donut Hole when your total out-of-pocket sending (also called TrOOP) reaches a certain level.  Your TrOOP threshold (like your Initial Coverage Limit) can change every year and here are a few examples (as reference, the TrOOP threshold for 2006 was $3,600):

 In 2007 = $3,850  In 2012 = $4,700  In 2017 = $4,950  
 In 2008 = $4,050  In 2013 = $4,750  In 2018 = $5,000  
 In 2009 = $4,350  In 2014 = $4,550  In 2019 = $5,100  
 In 2010 = $4,550  In 2015 = $4,700  In 2020 = $6,360  
 In 2011 = $4,550  In 2016 = $4,850  In 2021 = $6,700

What you spend in formulary drugs counts toward TrOOP.  TrOOP is made up of what you pay during the initial deductible (if you have one) plus what you personally pay in the initial coverage phase, before the Donut Hole plus what you pay in the Donut Hole (and 70% of the brand-name drug discount paid by the drug manufacturer).

What you spend on monthly Medicare plan premiums does not count toward TrOOP.  Your monthly Medicare Part D premiums are not included in TrOOP- nor are any medications that you purchase outside of your Medicare Part D plan (for instance, from a non-US pharmacy) - nor any medications that are not covered by your Medicare Part D plan.

After you spend over your annual TrOOP threshold, you enter the Catastrophic Coverage portion of your Part D plan where the cost of your prescription medications is significantly reduced - you will not pay more than 5% of the retail costs for your medications.

Keeping track of your Expenses

The good news: You do not need to keep track of the retail cost of your medications or what you actually spend on drugs. Your Medicare Part D plan will account for all of your formulary drug purchases and then your plan will send you a monthly statement (the Explanation of Benefits (EOB)) detailing your purchases and how close you are to the coverage gap.  Also, you may find that some pharmacies print receipts showing your drug purchase and where you are in comparison to the coverage gap.

The reality: Most people do not pay attention to their monthly EOB letter that they receive from their Medicare Part D drug plan.  Instead, we find that most people know they are in the Donut Hole when they purchase their medications and suddenly pay a different price for their drugs - and that is why we built our Q1Medicare.com PDP-Planner or Donut Hole calculator.  You can use the Donut Hole calculator to enter your monthly retail drug costs and see when (or if) you will enter (or exit) the Donut Hole.

Will you pay more for your formulary drugs when you enter the Donut Hole?

Maybe.  The change of your drug coverage costs (increase or decrease) when entering the Donut Hole depends on what drugs you use and your plan's coverage costs before entering the Donut Hole.  You can read more in our Frequently Asked Question (FAQ) that shows examples of how drug costs can go decrease or increase when you enter the Donut Hole: https://Q1FAQ.com/719.html

Would you like more information?

We have more information online about the Donut Hole or Coverage Gap here:

Still not sure how the Donut Hole or Coverage Gap fits into your Medicare prescription drug plan?  Click on the following link and send us your question:  https://q1medicare.com/q1group/ Helpdesk.php.

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