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What kind of discount can we expect in the Medicare Part D Donut Hole or Coverage Gap?



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Question: What kind of discount can we expect in the Medicare Part D Donut Hole or Coverage Gap?
Category: Closing the Coverage Gap

Answer:

Starting back in the 2011 Medicare Part D plan year, a discount or co-insurance (cost-sharing) was introduced to reduce the cost of generic and brand-name prescription drugs purchased by non-LIS Medicare beneficiaries once they entered the Coverage Gap (or Donut Hole / Doughnut Hole) portion of their stand-alone Medicare Part D prescription drug plan (PDP) (or Medicare Advantage plan that included prescription drug coverage (MAPD)).

If you reach the Donut Hole phase of your Medicare prescription drug plan and your medication is on your plan's formulary and you are not receiving financial Extra Help (LIS):
  • In 2018, you will receive a 65% discount on brand-name drugs and a 56% discount on generic drugs.  (You paid 35% of your plan's negotiated retail cost for brand-name prescriptions and 44% of the retail cost for generics.)

  • Spoiler Alert: In 2019, you will received a 75% discount on brand-name drugs and a 63% discount on generic drugs.  (You will pay 25% of your plan's negotiated retail cost for brand-name prescriptions and 37% of the retail cost for generics.)
Please see the charts below for Donut Hole discounts 2011 to 2020.

Please note: The Donut Hole discount is not available to anyone receiving financial Extra Help (the Low-Income Subsidy).   Also, the Donut Hole discount is only for Medicare Part D drugs included on your Medicare prescription drug plan's formulary or drug list.

The generic drug discount will increase each year until the plan year 2020 when the co-insurance for generics in the Coverage Gap will be 25%.  The following table shows how the annual generic drug discount increases:
 

Generic Drug Discount

Plan

Year

Beneficiary

Cost-Sharing

Plan

Cost-Sharing

2011

93%

7%

2012

86%

14%

2013

79%

21%

2014

72%

28%

2015

65%

35%

2016

58%

42%

2017

51%

49%

2018

44%

56%

2019

37%

63%

2020

and beyond


25%


75%



The brand-name drug discount operates differently from the generic drug discount - but the brand-name drug discount will also be reduced to co-insurance of 25% by 2019.

 

Brand-Name Drug Discount

Plan Year

Beneficiary Cost-Sharing

Plan Cost-Sharing

Manufacturer Cost-Sharing

2011

50%

0%

50%

2012

50%

0%

50%

2013

47.5%

2.5%

50%

2014

47.5%

2.5%

50%

2015

45%

5%

50%

2016

45%

5%

50%

2017

40%

10%

50%

2018

35%

15%

50%

2019

25%*

5%

70%

2020

and beyond


25%


5%


70%

* Update February 12, 2018: President Trump signed the Bipartisan Budget Act of 2018 (Pub.L. 115-123) on Friday, February 9, 2018 that effectively "closes" the Coverage Gap for brand-name drugs, with the brand-name Donut Hole discount increasing to 75% in 2019.

A key feature to the new law is that the pharmaceutical industry will be responsible for 70% of the cost of medications in the Coverage Gap, therefore you will receive credit for 95% of the retail drug cost toward meeting your 2019 total out-of-pocket maximum or Donut Hole exit point (the 25% of retail costs you pay plus the 70% drug manufacturer discount - see the next paragraph **).  As a note, since the brand-name drug manufacturer will take on an additional 20% of the retail cost, the Medicare Part D plan's responsibility will decrease to 5% (from the originally planned 20% in 2019 and 25% in 2020 and beyond), the Medicare beneficiaries portion will decrease to 25% (from the original planned 30% in 2019).

** Update May, 2018:  In the document "American Patients First, The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs (May 2018)", a proposal was made to exclude the manufacturer's Donut Hole discount from the out-of-pocket (TrOOP) calculation.  If this proposal is implemented, research indicates that fewer people will enter the Catastrophic Coverage phase and these people will have higher out-of-pocket spending.  (see also: https://budget.house.gov/wp-content/uploads/2018/06/FY19_Budget-Blueprint-Final.pdf)

Looking for more?  Related questions can be found here:
 



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Tips & Disclaimers
  • The Medicare Advantage and Medicare Part D prescription drug plan data on our site comes directly from Medicare and is subject to change.
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