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What is the Donut Hole?


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.

The Donut Hole begins when your total drug costs have reached $4,430 in 2022.  In the Coverage Gap (Donut Hole), you pay 25% of the cost for brand name drugs and 37% of the cost of generic drugs, until you reach $7,050 in 2022 in out-of-pocket costs.

The table below explains each of the 4 drug payment stages:

 Medicare Part D – Prescription Drug Plan Stages

Annual Deductible $445 in 2022

You pay 100% for the costs of your prescriptions until you reach your deductible. Most plans have a $480 deductible in 2022. Some plans are lower or have a $0 deductible. Deductible only applies to Tier 3-5 on most plans.

Total Maximum Out-of-Pocket Spending: $7,050 in 2022.

Initial Coverage $4,430 in 2022

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.

Total Maximum Out-of-Pocket Spending: $7,050 in 2022.

Coverage Gap – Donut Hole $7.050 in 2022

Known as the Donut Hole. You are responsible for paying 25% to 37% of the costs for both brand name and generic prescriptions. You will stay in the donut hole until your costs reach $7,050 in 2022.~ 12% of Medicare Beneficiaries reach the Coverage Gap.

Total Maximum Out-of-Pocket Spending: $7,050 in 2022.

Catastrophic Coverage $3.95 / $9.85 or 5%

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. ~5% of Medicare Beneficiaries reach Catastrophic Coverage

Total Maximum Out-of-Pocket Spending: No Limit

Once your costs reach $7,050 in 2022 you will then move to the Catastrophic Coverage stage.  Your drug costs will be reduced substantially for the remainder of the year.  Medicare does not have an upper limit for out-of-pocket costs to you.

Learn More: Do Medicare Advantage plans cover the Donut Hole?

People Also Read: What is Extra Help?

Meet Melissa MacCalla

Medicare is not simple and can be hard, frustrating, and downright confusing for most. I love when I get someone on the phone and I am given the opportunity to explain the difference in plans to them and have Medicare make sense. I enjoy talking to clients year after year, hearing about their families growing or them asking about mine.


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