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The Doughnut Hole (Part D Coverage Gap)

Summary

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The "doughnut hole" (donut hole) is the common name for a coverage gap in Medicare prescription drug coverage. The gap starts when you and Medicare spend a base amount during a calendar year, and ends when expenditures reach a catastrophic limit during the same year.  In 2016, the "doughnut hole" refers to drug expenditures by you and Medicare between a base amount of  $3,310. You will stay in the Doughnut hole until your TROOP (True Out-of-Pocket) costs reach $4,850.

NOTE: People with Medicare who get Extra Help offsite link paying Part D costs won’t enter the coverage gap.

Before you reach the doughnut hole:Only certain costs are counted before entering the doughnut hole. These are different from costs which count while you are in the doughnut hole.

In the doughnut hole: 

  • Brand Name Drugs
    • Once you reach the coverage gap in 2016, you'll pay 45% of the plan's cost for covered brand-name prescription drugs. You get these savings if you buy your prescriptions at a pharmacy or order them through the mail. The discount will come off of the price that your plans has set with the pharmacy for that specific drug. 
    • Although you'll only pay 45% of the price for the brand-name drug in 2016, 95% of the price—what you pay plus the 50% manufacturer discount payment—will count as out-of-pocket costs offsite link which will help you get out of the coverage gap. What the drug plan pays toward the drug cost (5% of the price) and what the drug plan pays toward the dispensing fee (55% of the fee) aren't counted toward your out-of-pocket spending.
    • The discount will come off of the price that your plan has set with the pharmacy for that specific drug. 
  • Generic Drugs
    • In 2016, Medicare will pay 42% of the price for generic drugs during the coverage gap. You'll pay the remaining 58% of the price. What you pay for generic drugs during the coverage gap will decrease each year until it reaches 25% in 2020. The coverage for generic drugs works differently from the discount for brand-name drugs. For generic drugs, only the amount you pay will count toward getting you out of the coverage gap.
  • There is no discount for drugs in the doughnut hole if:
    • The drug is not on the plan's formulary.
    • The drug manufacturer declines to participate in the discount program. (In fact, these drugs are not covered even in the initial and castrophic periods, or in the Extra Help program, either).  According to AARP, manufacturers of 99% of brand-name drugs used by Medicare beneficiaries have agreed to provide the discounts.
  • You continue to pay the premium for your plan. The premium does not count toward getting you out of the hole.

The catastrophic limit is reached by adding all of the following:

  • What you pay, plus
  • What the plan pays, plus
  • An amount equal to a 52.5% discount for brand name drugs plus dispensing fees

Many drug plans include both preferred and non-preferred pharmacies in their pharmacy networks. You may pay less for your drugs at preferred pharmacies. 

If you think you've reached the coverage gap and you don't get a discount when you pay for your brand-name prescription, review your next "Explanation of Benefits" (EOB) offsite link. If the discount doesn't appear on the EOB, contact your drug plan to make sure that your prescription records are correct and up-to-date. Get your plan's contact information from a Personalized Search (under General Search) offsite link, or search by plan name offsite link. If your drug plan doesn't agree that you're owed a discount, you can file an appeal offsite link

On the other side of the doughnut hole: Once the catastrophic limit is reached, every Medicare Part D plan again takes over payment of drug costs. At this point and for the rest of the year, you pay the greater of 5% of the cost of the drugs covered by your plan or the following fixed copayments in 2015: Generic drugs: $2.65; Other drugs: $6.50

Accounting: Your Medicare drug plan should keep track of how much money you have spent out-of-pocket on your covered prescription drugs and which coverage period you are in. This information should be printed on your monthly statements. To make sure this information is correct, it is advisable to keep your receipts from the pharmacy until you compare the amounts to the amounts in the statement.

NOTE: If you are a recipient of Extra Help, there is no Doughnut hole. 

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