What is the Medicare Donut Hole?

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The Donut Hole

Most Medicare Prescription Drug Plans have a coverage gap, commonly referred to as the donut hole. You reach this point once you and your plan spend a certain amount, which changes every year. When that happens, your plan places a temporary limit on its prescription drug coverage.

Not everyone reaches the donut hole. It only happens if you and your plan spend a combined $3,750 on covered prescriptions (the limit in 2018). If you do reach that point, you will pay no more than 35 percent for covered brand-name prescriptions and 44 percent for generic drugs.

Your yearly deductible, co-insurance, co-payments, and what you pay while in the coverage gap all count toward your yearly out-of-pocket limit. It does not include your monthly premiums, dispensing fees charged by your pharmacy, or anything you pay for prescriptions that are not covered by your plan.

How Costly Can the Coverage Gap Be?

When you are in the donut hole, the coverage gap could amount to thousands of dollars. Once you reach the total out-of-pocket limit for the year – $5,000 in 2018 – you leave the donut hole and enter catastrophic coverage. For the rest of the year, you’ll pay only a small fee for co-insurance or co-payment on covered prescriptions.