What is the Medicare Part D Donut Hole and should I be scared?
The prescription drug donut hole is a gap in Medicare Part D’s prescription drug coverage. All Medicare Part D plans are subject to the Donut Hole; however if you receive creditable drug coverage from an employer plan or a retiree plan, then you are not subject to the Donut Hole. The Donut Hole can be scary if you aren’t prepared for it. This article will help you gain a better understanding of the Part D Donut Hole, and how you can anticipate if and when you may fall in.
Once you and your Medicare Part D plan have spent a certain amount on covered prescription drugs during a calendar year ($3,700 in 2017), you reach the coverage gap. This means that when you add together anything you have spent out of pocket for your drugs to include, deductibles, copays and coinsurance PLUS what your Part D provider has paid equals $3,700, you are in the Part D Donut Hole. Don’t worry you don’t have to keep track of this yourself, your Part D provider will mail you a statement each month showing you how close to the donut hole you are.
Your in the Donut Hole, so now what? You pay a larger percentage of your prescription drug costs while you’re in the Donut Hole until you reach the catastrophic phase. In 2017, you will pay 51% of the total cost of generic drugs and 40% of the total cost of brand name drugs when you are in the Donut Hole. This is where your out of pocket expenses for your drugs can change drastically. For example, if you take a brand name drug like Crestor for your cholesterol; before you fall into the Donut Hole, you may have only have to pay a $45 copay for a one month supply. Once in the Donut Hole you will pay 40% of the total cost of Crestor, which could be as high as $130 for a month supply.
If you are living on a budget, an unexpected change like this to your monthly expenses can cause some financial difficulties, and that is just what happens with one drug. Imagine if you take two or three brand name drugs. It is best to prepare as best you can for these potential changes in your drug costs. If you are not able to determine when you may fall into the Donut Hole, contact a licensed health insurance agent to assist you.
You can get out of the Donut Hole and into the catastrophic coverage stage when your total out of pocket costs reaches $4,950 in 2017. Then Medicare Part D coverage kicks in again, and you will only pay $3.30 for a month’s supply of generic drugs and $8.25 for a month’s supply of all other drugs. It is very important to understand that what counts toward getting you out of the Donut Hole is only what you pay out of your own pocket. What your Part D provider has paid for any of your drugs does NOT count towards the $4,950 required to get out of the Donut Hole.
Is there any hope? Yes, the good news is the donut hole isn’t as big as it used to be. When Medicare Part D launched in 2006, Medicare beneficiaries had to pay 100% of their prescription drug costs during this gap in coverage. In 2017, you pay 40% of the cost of brand-name prescription drugs and 51% for generics while in the Donut Hole. These percentages are scheduled to decrease every year, bottoming out at 25% for both brand name and generic drugs in 2020. This will effectively close the Donut Hole, putting costs on par with what you pay between the time you meet your deductible (if you have one) and when you hit your out-of-pocket spending limit.
Calculating your annual drug costs will get simpler in 2020 when the donut hole closes. Until then, following these tips may help you climb out of it more quickly – or keep you from falling into it in the first place:
- Opt for generics if your doctor thinks they’re appropriate. The lower costs for generics may be enough to keep you from slipping into the donut hole.
- You may want to consider not using your Part D coverage for your generic dugs. Only medications for which you use your Part D benefits to get count toward your spending limit. This strategy works for those with several brand name drugs and know they will fall into the Donut Hole. Not applying your generic drug costs to your spending limit may delay your entry to the Donut Hole for a month or two.
Call one of our HealthEnroller.com agents to get help calculating your annual drug costs and finding a Part D plan that is best for you. Click here to shop for Part D plans in your area.