What is the Medicare Donut Hole?
The Donut Hole
Most Medicare Prescription Drug Plans have a coverage gap which is also referred to as the “donut hole.” This means that the prescription drug plan places a temporary limit on what it will cover for prescription drugs. The coverage gap begins after you and your prescription drug plan together have spent a specific amount for covered prescription drugs for that year. This amount in 2017 is $3,700 and may change each year. Once you and your plan reach this limit, you will pay no more than 40% of the price for brand names prescription drugs and up to 51% for generic prescription drugs. A person’s yearly deductible, coinsurance/co-payments, and what a person pays while in the coverage gap all count toward this yearly limit. The limit doesn’t include premiums paid monthly, pharmacy dispensing fees or what a person pays for prescription drugs that aren’t covered by the prescription drug plan.
How costly can the coverage gap be?
While enrollees are in the donut hole, the coverage gap could amount to thousands of dollars. Once an enrollee reaches the total out-of-pocket limit during the coverage gap, which is $4,950 in 2017, they are bumped out of the coverage gap and into “catastrophic coverage.” Catastrophic coverage guarantees that once an enrollee has spent up to his or her plan’s out-of-pocket limit for covered prescriptions the person will only pay a nominal coinsurance fee or co-payment for their prescription drugs for the rest of the year. What you pay for generic prescription drugs during the coverage gap will decrease each year until it reaches 25% in 2020. This is different from the discount for brand-name prescription drugs. For generic prescription drugs, only the amount you pay will count toward getting you out of the coverage gap.