Medicare Donut Hole
(Part D Donut Hole)
What is the Medicare Part D Coverage Gap (Medicare Donut Hole)?
The Medicare Part D Coverage Gap —sometimes called the “Medicare donut hole” or “Part D donut hole” —occurs when you max out your regular prescription coverage. While in the gap, you would be responsible for all your prescription costs until you have paid your out-of-pocket maximum and move into catastrophic coverage.
What is a Medicare Prescription Drug (Part D) Plan?
Medicare Part D helps people pay for their prescription drugs. Part D plans are offered by private insurance companies that are monitored by the Centers for Medicare and Medicaid Services (CMS), the federal department that manages Medicare. A Part D plan offers stand-alone prescription coverage, while some Medicare Advantage (Part C) plans include prescription Part D prescription drug coverage in their benefits.
When enrolled in a Part D plan, you pay a monthly premium and copay for covered prescription drugs. Many plans also have an annual deductible that must be met before coverage begins. Each plan varies in costs, but all Medicare prescription drug plans must provide at least the standard level of coverage set by CMS.
A Donut Hole Example Scenario
It’s May and you and your Part D plan have spent $4,660 on your prescriptions so far this year. Because of limits on how much your plan will cover, the Part D plan will not cover your costs beyond the $4,660 already spent.
While in the Part D donut hole or coverage gap, you will pay 25% or less for brand-name prescription drugs. However, almost the entire cost of the drug will count to your out-of-pocket maximum. For example, if your prescription costs $100 full price, you might pay $25. However, $90 total will be credited toward your out-of-pocket maximum every time you buy that prescription—the $100 cost minus $10 for fees and manufacturing costs, even though you actually paid $25 for the prescription.
For generic prescription drugs instead of brand-name, you will still pay that 25% or less cost, but only that amount will be credited toward your out-of-pocket maximum. Generic prescriptions may cost you less in the coverage gap, but it may take longer to leave the coverage gap with only generic drugs.
Leaving the Medicare Donut Hole
Once you’ve paid your out-of-pocket maximum for prescriptions—an amount that is set by CMS and may change each year—you will be moved into catastrophic coverage. Catastrophic coverage ensures that you only pay a small copay or coinsurance for your prescriptions the rest of the year.
Can I Avoid the Donut Hole?
You have several options for lowering your prescription costs and to potentially avoid the donut hole completely. Comparing your Part D options from multiple carriers every year can help ensure that you have the plan with the right costs and coverage for you. Talking to your doctor about generics or lower-cost options instead of brand-name prescriptions may lower your costs.
State Programs
Many states have Pharmaceutical Assistance Programs that may be able to help with your premiums, drug costs, and more. Look online or contact your local Department of Health to learn more about state-based aid.
Extra Help
Extra Help is a prescription cost assistance program run by the Social Security Administration and Medicare. If you qualify—based on limited income—the costs of your prescriptions will be set by Extra Help and you will avoid the donut hole. If you are on Medicaid or eligible for Medicaid, you may also qualify for Extra Help.
Enrollment Eligibility
Annual Enrollment Period (AEP)
Medicare Annual Enrollment Period runs each year from October 15 to December 7. What is the Annual Enrollment Period vs. Open Enrollment Period?
Initial Enrollment Period (IEP)
Your Initial Enrollment Period generally surrounds your 65th birthday but may occur if you otherwise become eligible for Medicare for the first time.
Special Enrollment Period (SEP)
You may be eligible if you experience a qualifying life event such as moving to a new zip code, losing employer coverage, or change in Medicaid status.
Further Reading:
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Last Updated: September 30, 2024
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