Medicare Donut Hole – If you’re taking many prescription medications, you might be familiar with the Medicare donut hole. But, whether you’re familiar with it or not, it still leaves many people confused and asking a lot of questions. Today, we’re going to discuss what the donut hole is how your prescription drug coverage works if you find yourself in this coverage gap.
Medicare’s Donut Hole
You might also hear the donut hole referred to as the Medicare coverage gap. It can be found inside every Part D prescription drug plan, whether you have a stand-alone Part D plan or if you have one within your Medicare Advantage plan. If you find yourself in the coverage gap, you will pay more for your prescription medications.
Let’s review the Part D coverage phases so that you know when you might find yourself in the donut hole.
Part D Coverage Phases
There are four coverage phases within Medicare Part D.
The Deductible Phase
Most Part D plans have a deductible of up to $480 per year. Your plan could have a lower deductible, but never more than that amount in 2022. (Deductibles often change each year.) The nice thing about the Part D deductible is that it usually does not apply to prescriptions within the first one or two tiers of your drug formulary. That means it won’t apply to common, generic drugs like those you might take for high blood pressure or high cholesterol.
Initial Coverage Phase
Once you’ve met your deductible, you’ll be in the initial coverage phase. You’ll be required to pay any copays or coinsurance amounts for your medications. For example, if your Part D plan has a 20% coinsurance cost for a drug that costs $20, you’ll be responsible for $4, and your plan would pay the other $18.
The Donut Hole / Coverage Gap
When you and your Part D plan have spent a total of $4,430 for the year, you’ll find yourself in the donut hole. (This amount does not include premiums, pharmacy dispensing fees, or anything you have spent on non-covered prescriptions.)
While in the coverage gap, you could pay up to 25% of the cost of your prescriptions.
Catastrophic Coverage Phase
The good news is, there is another side of the donut hole. Once you have spent a total of $7,050 out of your own pocket, you’ll go into the catastrophic coverage phase. You’ll pay a much smaller copay or coinsurance amount for the remainder of the year.
For generic medications, you’ll pay the greater of 5% or $3.95, and for other prescriptions, the greater of 5% or $8.95.
Why does the Medicare donut hole exist?
The reason there is a Part D coverage gap is to incentivize Medicare beneficiaries to use generic prescriptions instead of name-brand drugs. Doing so would save the beneficiary and the insurance company money each year.
The coverage gap has changed over the years. Initially, once inside the coverage gap, people had to pay 100% of their prescription costs. Thankfully, that amount was reduced in more recent years.
Money-Saving Tactics for Prescription Medications
Individuals who take expensive prescriptions will probably not be able to avoid the donut hole. However, there are a few tactics you can use to delay it or avoid it altogether.
If you are taking name-brand medications, speak to your doctor about switching to generic options. The FDA requires all generic alternatives to have the same ingredients and effect as their name-brand partners, so changing to a generic might be a simple way to save money.
You should also make sure you’re using a preferred pharmacy. Insurance companies that offer
Part D plans have specific relationships with pharmacies. Using a “preferred’ pharmacy will give you the best prices. If you use a “standard” pharmacy instead, you’ll pay a lot more for your medications. Remember, pharmacy networks can change each year, so you should have your Part D plan reviewed during the Annual Enrollment Period (AEP) to make sure it still works with your pharmacy.
You may also find that you can save money by ordering your medications online. Some Part D plans offer better prices on 90-day or 100-day supplies. You’ll need to refer to your plan details to find out if online ordering is an option for you.
There are also manufacturer’s discounts for many medications. Surprisingly, most of the time, all you have to do is ask the manufacturer for the discount, and they’ll send you a coupon. This is especially common when it comes to name-brand and specialty medications. You can either call the company directly or ask your doctor about possible discounts.
Lastly, you might be eligible for Extra Help. This is a program that offers financial assistance to individuals with low incomes. You might qualify for help with deductibles, copayments, or coinsurance. In addition, if you are enrolled in Extra Help, the donut hole will not apply to you.
If you find yourself in the donut hole every year, reach out to one of our Medicare advisors. We can help search for cost-saving solutions and also make sure you’re enrolled in the right Part D plan.