The Medicare Part D Donut Hole

Not all donut holes are sweet. In Original Medicare Part D, there is a coverage gap known as the “Part D Donut Hole.” This coverage gap for pharmaceutical medications can result in higher drug costs for Medicare beneficiaries, as they get stuck between spending limits on Rx costs and their total out-of-pocket cost limits for a given year.

How Does the Part D Donut Hole Work?

For beneficiaries enrolled in Medicare Part D, there is a phase of their prescription drug coverage that exists between the initial coverage period and the maximum out-of-pocket costs limit. In this phase of coverage, Part D beneficiaries are responsible for a set percentage (up to 25%) of their total prescription drug costs, instead of set copays, based on their plan.

This phase is known as the Medicare Part D Donut Hole.

Beneficiaries can experience higher prescription drug costs during this phase. The coverage gap begins when individuals reach a certain spending limit on prescription drugs in that year, but have not yet reached their total out-of-pocket spending limit. For example, in 2021, the Part D prescription spending limit is $4,130, but the total out-of-pocket spending limit is $6,550.

If an individual has spent the $4,130 on prescription medications, but has not reached their out-of-pocket limit, they will be responsible for a set percentage of their drug costs until they reach the out-of-pocket maximum. This can result in higher costs for prescriptions, as you’ll pay up to 25% of the cost for your medications, instead of a set copay, based on your plan.

Can I Avoid the Part D Donut Hole?

If you regularly take prescriptions on a Part D Medicare plan, you can help avoid the Part D Donut Hole by monitoring your out-of-pocket spending on prescription medications. Your Part D plan monthly statements should include this information.

The main way to avoid the Part D donut hole is by keeping your prescription drug costs as low as possible. By minimizing your medication spending, you can help avoid hitting the Part D spending limit. If you do not hit the Part D spending limit, you will avoid going into the Part D “donut hole” coverage gap.

You can also look into Medicare Supplement plans, also known as “Medigap” plans, that help cover additional costs for prescriptions related to Part B drug costs.

If you meet certain income and resource limits, you might qualify for Extra Help, a program to help pay for drug costs. People who receive Extra Help for drug costs do not have a coverage gap, and will not go into the donut hole. Start here to see if you qualify for Extra Help.

Review your Medicare prescription drug plan every year to make sure you have the best coverage for your needs. Even if your existing plan coverage has not changed, there might be new plans available in your area that save you money on prescription drugs. A local senior health plan specialist might be able to help you review your options and make a changes to your plans, all at no cost to you. Review your coverage today to make sure you stay in the sweet spot and help avoid the donut hole with Rx drug costs.

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