The Medicare Part D Donut Hole is a widely discussed topic and its important to understand how it may impact you. In this article, you will learn more about:
- What is the Donut Hole in Medicare
- Understanding Medicare Part D Costs
- Medicare Donut Hole Explained
- Medicare Donut Hole Chart
- Tips on avoiding the Part D Donut Hole
- Is there donut hole insurance?
What is the Donut Hole in Medicare?
Medicare Donut Hole is a term used to describe the coverage gap in Medicare’s prescription drug benefit. In general, Medicare Part D plans have a deductible, an initial coverage phase, coverage gap (Donut Hole) and a catastrophic coverage phase.
During the “Donut Hole”, you are responsible for a certain percentage of your prescription drug costs (25% of the cost). Once you reach the out-of-pocket threshold for the year, you enter the catastrophic coverage phase, and your costs are greatly reduced.
The Medicare Donut Hole has been a source of controversy since it was created as part of the Medicare Modernization Act of 2003. Some critics argue that it creates a financial barrier for seniors who need expensive drugs. Others argue that it helps keep Medicare Part D premiums affordable for all beneficiaries.
Regardless of the debate, the Donut Hole is an important part of Medicare Part D and understanding how it works is essential for anyone enrolled in a Medicare prescription drug plan.
Understanding Medicare Part D Cost
Not everyone will hit the Medicare Donut Hole and fall into the coverage gap. In fact, only about 12% of all Medicare beneficiaries fall into the Medicare donut hole each year.
With that said, lets talk a little more about all four phases of Medicare Part D costs.
- Deductible (Phase 1): Beneficiary pays 100% for the costs of your prescriptions until you reach your deductible. Not all plans have a deductible. The standard deductible in 2022 is $480. Some plans are lower or have a $0 deductible. On most plans, the deductible only applies to Tier 3-5 drugs.
- Initial Coverage (Phase 2): You pay a copay (percentage of the drug cost) when you fill a prescription. This stage will last until you reach $4,430 in 2022 in out-of-pocket expenses.
- Coverage Gap/Donut Hole (Phase 3): You are responsible for paying 25% to 37% of the costs for both brand name and generic drugs. You will stay in the donut hole until your costs reach $7,050, in 2022.
- Catastrophic Coverage (Phase 4): Once you reach catastrophic coverage, copays are typically lower than during the Initial Coverage stage. This stage will last for the rest of the year. About 5% of Medicare Beneficiaries reach the Catastrophic phase.
Medicare Donut Hole Chart
Medicare Donut Hole Explained (How does the Medicare Donut Hole Work)
The short answer is that your drug costs will increase when you are in the Part D donut hole (coverage gap). The donut hole in Medicare is not a good thing.
The technical part of this answer is that you can fall into the Medicare Donut Hole when your total drug costs have reached $4,430 (in 2022).
Remember, that is not YOUR total amount spent, that is the total between you AND the insurance company.
Upon reaching that threshold of $4,430 you are now in the coverage gap.
You are in the Medicare coverage gap until you reach the next threshold for catastrophic coverage, which is $7,050.
Avoid the Medicare Donut Hole
Sometimes, there’s just no avoiding it. We talk to clients that will hit the donut hole every year, sometimes as early as March or April.
On the other hand, there are plenty of clients that we also help that don’t hit the Medicare coverage gap until October, November and sometimes December. For those and other, there are simple steps you can take to be sure you avoid the donut hole Medicare.
- Use generics when possible. Often, we speak with beneficiaries that aren’t aware there are generics available. Be sure to speak with your physician about generics.
- Consider alternative treatment options. If a generic is not available with your current medication, ask your physician about alternative medications that cos less or offer a generic option.
- Check pharmacies for pricing. Shopping at multiple pharmacies can be inconvenient. But, when it comes to saving money and avoiding the donut hole, this simple tip makes the list.
- Canadian Pharmacies. There are many credible, Canadian pharmacies that offer certain medications at a heavily discounted rate. You can typically find, inhalers, eye drops and sometimes insulin.
- Mail-Order Pharmacies. Most drug plans offer a mail-order option that can help reduce the cost of your medications.
- Compare Medicare Drug Plans. Unless you have a special enrollment period, you can only change drug plans one time per year. Take advantage and be sure you compare Part D plans annually.
- Samples. Ask your physician for samples as often as possible.
- Use coupons. It’s important that you check to see if the drug manufacturer offer any coupons. Also check for in-store pharmacy coupons/savings (insurance is typically the best, but not always).
- Discount Drug Cards. There are a few 3rd party companies that offer discount for using their program. You cannot combine discounts with insurance.
- Apply for Extra Help (LIS). Medicare offers financial assistance with the cost of prescriptions. Extra Help (LIS) is not the same as Medicaid.
Get Help with the Medicare Part D Donut Hole
The team at Senior HealthCare Solutions are licensed and certified to help you with Medicare Part D and the Donut Hole.
Call now, 866-633-4427 and speak with a licensed insurance agent that will help evaluate your medications and plan coverage options.
Prefer to do it yourself? Compare Medicare Drug Plans online.
If not isn’t a good time, we get it. But, don’t’ forget to schedule your appointment and we will call you at a time convenient for you.
Free Medicare Resources:
Video: 2022 Medicare Part D and Donut Hole Explained
Infographic: Medicare Donut Hole Chart
Lower Part D Cost, Flex Card for Seniors
You may also like:
Humana Medicare Plans, Medicare Enrollment Periods, Medicare Easy Pay
Donut Hole Frequently Asked Questions
Do Medicare advantage plans cover the donut hole?
Medicare Advantage plans that include drug coverage have the same standardized coverage levels, as required by Medicare.
You may or may not hit the donut hole. Whether you have a Medicare Advantage Plan that includes drug coverage or a stand-alone drug plan, there is a chance you may hit the donut hole. When you land in the donut hole, the costs of your medications will increase.
Do all Medicare Part D plans have a donut hole?
Yes, all Medicare Part D drug plans have standardized coverage phases, as required by Medicare. Whether you hit the donut hole or not depends mostly on the medications you take, pharmacy and the plan you are enrolled in.
Is there donut hole insurance?
No, you cannot purchase donut hole insurance to protect you from cost associated with hitting the donut hole “coverage gap”.
How to get out of the Donut Hole
Once you’ve hit the donut hole on your plan for any given calendar year, the only way to get out of the donut hole is to qualify for the catastrophic coverage phase. The catastrophic coverage phase will lower the cost of your prescriptions.
Why is there a donut hole in Medicare?
Although most think that the donut hole is intended to “hurt” members, the reality is that the donut hole was intended to help incentivize people to use generic medications instead of brand-name. By using generic medications, it would keep costs down to the member and help the Medicare program save money over time.
Is the donut hole going away?
Technically, the donut hole expired in 2020, but members will still pay additional cost past the initial coverage level. Furthermore, insurance carriers, agent and members are still being provided marketing information with the term donut hole “coverage gap”