SENIORS

What is the Donut Hole?

More and more employers are beginning to integrate wellness programs into their benefits. Learn more.

What is the Donut Hole?

Medicare has strict regulations around its prescription drug plans, and one of the most commonly asked about features is ‘the donut hole’. Also known as, ‘the coverage gap’, this benefit structure applies to both stand-alone Medicare Prescription Drug Plans and Medicare Advantage Prescription Drug plans, but not everyone enters it. If you’re currently taking medications or are concerned about lowering your prescription drug costs, it may be helpful for you to understand what the Medicare ‘Donut Hole’ is and how to avoid it.

2020 Prescription Benefit Chart

It may help you to understand the overall progress an individual may encounter as they fill their prescriptions throughout the year. This chart will serve as a useful aid. It describes the various stages that you may encounter. While a prescription plan is not required to have a deductible, if the plan does not, it is required to have an actuarial amount that is the same.

2020 Donut Hole Explanation

Coverage GAP

The coverage gap, commonly referred to ask “The Donut Hole” has several phases.
The coverage gap is a temporary limit on what most Part D Prescription Drug Plans or Medicare Advantage Prescription Drug plans pay for prescription drug costs. While you’re in the coverage gap, you might pay higher costs for brand-name and generic drugs. Below we’ve described each phase:

  • Deductible period: For most stand-alone Medicare Prescription Drug Plans and Medicare Advantage Prescription Drug plans, you’ll pay 100% for medication costs until you reach the yearly deductible amount (if your plan has one). The standard deductible for 2020 is $435.
  • Initial coverage period: After you’ve reached the deductible, you’ll enter the initial coverage phase, where you will pay the plan’s cost share for covered medications. For example, if your plan benefit includes a 25% coinsurance in this phase and you’re taking a medication that costs $400 a month, your out-of-pocket-cost would be approximately $100 a month.
  • Coverage gap, also known as the “donut hole”: begins if you and your plan spend a combined $4,020 in 2020 as described above. While in the coverage gap, you’ll typically pay 25% of the plan’s cost for brand-name drugs and 37% of the plan’s cost for generic drugs in 2020. You’re out of the coverage gap once your yearly out-of-pocket drug costs reach $6,350 in 2020.
  • Catastrophic coverage period: Begins if your out-of-pocket costs reach 2020 will be $6,350. During the catastrophic coverage phase, you’ll only pay a small coinsurance or copayment for covered prescription drugs for the remainder of the year. In the year 2020, a beneficiary will pay either a copay of $3.60 for generic drugs or $8.95 for name-brand drugs, or a coinsurance of 5%, whichever is greater.

Closing the Gap

Legislation has been signed to diminish the size of the coverage gap.

Below is a chart of how the costs are diminishing each year within the coverage gap.

Year Percent You pay for Brand Name Drugs Percent You pay for
Generic Drugs
2016 45% 58%
2017 40% 51%
2018 35% 44%
2019 25% 37%
2020 25% 37%

Tip

It can be a good idea to review your Medicare Prescription Drug Plan coverage every year, to see if your plan covers the medications you need now and may need in the upcoming year.

Schedule a Free Consultation

By submitting this form you are requesting a solicitation for insurance.

Request your Personalized Drug Costs Report

Saving money on your prescriptions is important. We’re here for you.