The Medicare Donut Hole, Explained
Hole. It’s one of the most confusing aspects of Medicare Prescription Drug coverage. And while there have been new laws passed that will make the coverage gap obsolete in a few years, it is still important for Medicare eligibles to understand what it means today, and how it can affect their finances.
We have compiled a few of the most frequently asked questions about the Medicare Donut Hole and answered them.
Question: What does it mean to “enter the Donut Hole”The Donut Hole, also called the Coverage Gap, occurs with most Medicare Prescription Drug plans. It occurs after you and your drug plan have spent a certain amount of money for covered drugs ($3,750 in 2018), and then you are responsible for some out-of-pocket costs for your prescriptions up to a yearly limit ($5,000 in 2018). There are discounts given to brand name and generic brand drugs, while in the Donut Hole.
Question: If I use only one brand-name drug that costs $347 and has a $47 copay, will I enter the 2018 Donut Hole?
Yes. If your retail drug costs average $347 a month, you will exceed your Medicare plan’s $3,750 Initial Coverage Limit and enter the Donut Hole (aka Coverage Gap) in November (10 months into the year). Remember, only your plan’s retail drug costs count toward entering the Donut Hole. The $47 copay has no impact on entering the Coverage Gap, but will impact when you exit the Donut Hole and enter the next phase; the Catastrophic Coverage phase.
Question: Where can I see how close I am to the hitting the Donut Hole?
You can review how close you are to hitting the Coverage Gap, every month in your Explanation of Benefits letter, that comes from your Medicare Plan. You can also calculate this manually, by adding up the total amount your Drug Plan has spent on your prescription drugs for the year (excluding co-pays), and then map out when you will hit the $3,750 mark based on your projected monthly costs.
Question: I use a brand-name drug that has a retail cost of $250. What will I pay for this medication when I reach the Donut Hole?
You will pay $87.50 in the Donut Hole. Once you hit the Donut Hole, you are responsible for paying 35% of the retail value for the brand name medications. This assumes that your Part D Plan does not provide any additional coverage in the Donut Hole. In addition, you will get a credit for 85% of the retail cost toward meeting your $5,000 total out-of-pocket limit. This is referred to as TroOOP (Total Out of Pocket Costs).
Question: Will I receive the Donut Hole Discount on non-formulary drug purchases?
No. Only Medicare Part D prescription medications found on your formulary receive the discounts, (65% discount for brand names, and 56% discount for generic drugs. Non-formulary medications and medications excluded from Medicare Part D program, do not qualify for the Donut Hole discount – and your non-formulary drug purchases do not count toward meeting your total out of pocket limit of $5,000.
Question: If I reach the Donut Hole, am I allowed to use a pharmacy’s drug discount program instead of my Medicare Part D plan?
Yes. Because Medicare Part D plan coverage is voluntary, you can buy prescription drugs from a pharmacy discount program, without using our Medicare Prescription Drug Plan. There are no penalties for doing so.
If you have questions about your specific coverage and when you will enter the Donut Hole, feel free to reach out the Medicare advisors at Plan Medicare- 516-900-7877.