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Part D: What is the Medicare Donut Hole?

What is the Medicare Donut Hole?

The Medicare Donut Hole is also known as the Coverage Gap. This is one of 4 drug payment stages in Medicare Part D plans. In the Coverage Gap, you pay a percentage of the drug cost – instead of copay or coinsurance – until you reach your out-of-pocket limit.

For 2020, it begins when your total drug costs have reached $4,020.  In the Coverage Gap (Donut Hole), you pay 25% of the cost for brand name drugs and 25% of the cost of generic drugs, until you reach $6,350 in out-of-pocket costs. 

This table explains each of the 4 drug payment stages: 

Stage 1

Stage 2

Stage 3

Stage 4

Annual Deductible

$435

Initial Coverage

$4020

Coverage Gap – Donut Hole

$6350

Catastrophic Coverage

$3.60 / $8.95 or 5%*

You pay 100% for the costs of your prescriptions until you reach your deductible.  Most plans have a $435 deductible.  Some plans are lower or have a $0 deductible. 

You pay a copay (percentage of the drug cost) when you fill a prescription.  In 2020 this stage will last until you reach $4020 in out-of-pocket expenses. 

Known as the Donut Hole.  You are responsible for paying 25% of the costs for both brand name and generic prescriptions.  You will stay in the donut hole until your costs reach $6,350 in 2020. 

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. 

Total Maximum Out-of-Pocket Spending: $6350

No Limit

 Do Medicare Advantage plans cover the Donut Hole?

No.  Part D coverage is the same with Medicare Advantage or with a stand-alone prescription drug plan.  Both options will have the Donut Hole. 

Are all medications covered under Part D?

Each plan for prescription drug coverage must give you at least a standard level of coverage that is set by Medicare.  All plans can vary the cost of prescription drugs they cover (this is their formulary) and how they place drugs into a tier on their formulary. 

Each Medicare Part D prescription drug plan provider decides which drugs not to cover on its formulary, these category of drugs are usually not covered but a plan may decide to put it on their formulary. 

  • Over-the-counter drugs (non-prescription drugs)
  • Weight loss or weight gain drugs
  • Drugs for cosmetic purposes or hair growth
  • Drugs for sexual or erectile dysfunction
  • Drugs when used to promote fertility.
  • Drugs when used for the relief of cough or cold symptoms.
  • Prescription vitamins and minerals (except for prenatal vitamins and fluoride preparations).

Medicare Part D also does not cover any drugs that are covered under Medicare Part B.

Learn more about Medicare Part D Prescription Drug Plans

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