The Dreaded Medicare Part D Donut Hole
The Dreaded Medicare Part D Donut Hole
The Dreaded Medicare Part D Donut Hole

What is the Donut Hole in a Medicare Part D Drug Plan?

What is the dreaded donut hole? If we’re talking about pastry, we’re describing the missing middle of the ringed donut; but if you are referring to a Medicare Part D prescription drug plan, then the donut hole truly is something to dread—that is, if you are living on a small, fixed income.

So, to what are people referring when they speak of the Medicare Part D donut hole? The donut hole, also known as the coverage gap in Medicare circles, occurs after someone with a Medicare Part D drug plan has hit a certain spending limit on their prescription costs. When that limit is hit, then the costs go up for the person with the Part D plan. So, let’s see exactly how that works.

How Do You Hit the Donut Hole in a Medicare Part D Drug Plan?

If there is good news regarding the coverage gap (the donut hole), it is that not everyone will hit it. To enter the dreaded donut hole, the retail costs for one’s medications needs to hit $3,310 or $3,700 for 2017. How are these costs measured?

Each one of your medications has a retail cost. To see that cost, imagine you are taking Grow-a-statin (a made-up medication, to be sure). The retail cost of that medication is $50; however, your Medicare Part D drug plan pays for $30 of that cost, so your copay on your plan is $20. The cost toward the magic number of $3,310 (for 2016) that is recorded is not your copay of $20; instead, it is the entire retail cost of your medication—$50. So now you are $50 closer toward entering the coverage gap. (Note: If your Part D plan has a deductible, and most Part D plans do, the deductible counts toward reaching the coverage gap. So, if your plan in 2016 has a $360 deductible [it will be a $400 deductible in 2017] you have to pay, once you pay it, you will be $360 [or $400] closer to reaching the coverage gap.)

The good news for you is: If that is the only medication you take, you won’t come close to entering the donut hole. After all, twelve months of $50 retail only comes out to $300. You would be $3,010 short of hitting the coverage gap. Of course, the more medications you take, and / or the more expensive the medications, the better chance you have of hitting the dreaded donut hole. (By the way, if you use a good, reputable agent for your Medicare coverage, he or she can help you see if you will hit the coverage gap on your current medications. Regarding choosing a Part D plan, see Which Medicare Part D Drug Plan Is the Best One?)

What Happens When You Hit the Donut Hole in Your Part D Plan?

Once you hit the coverage gap, the costs on your medications will go up. In 2016—after meeting your deductible—you pay 25% of the costs of your medications during the initial coverage portion of your Part D drug plan. Once you hit the coverage gap, your costs shift to 45% (40% in 2017) of the retail costs of your brand name medications and 58% (51% in 2017) of the retail costs of your generic medications . . . until you hit the catastrophic coverage.

What Is Catastrophic Coverage in Your Medicare Part D Drug Plan?

As mentioned, the donut hole (the coverage gap) begins when retail costs of $3,310 for 2016 ($3,700 for 2017) have been met. Then, when retail costs for your medications meet $4,850 for 2016 ($4,950 in 2017), your cost sharing on your medications drops to paying the greater of 5% of the retail cost or $2.95 ($3.30 in 2017) for generics and $7.40 ($8.25 in 2017) for all other drugs (name brand and specialty medications). That means that if the retail cost of your medication is $50, in 2016, your catastrophic coverage cost for that medication would be $2.95 (since that amount is greater than 5% of $50, which would be $2.50).

It is important to understand that this cycle of Part D drug costs is an annual cycle, meaning your costs will start over (with the initial coverage phase) on January 1 each year. Because of this, most people who enter the coverage gap never hit the catastrophic coverage phase. However, those who do, are rewarded with lower drug costs through December 31.

How Do You Avoid the Donut Hole in Your Medicare Part D Drug Plan?

To be honest, some people will not be able to avoid the coverage gap. However, some can. One possible way to keep from hitting the coverage gap would be to replace brand name medications with generics wherever you can. By doing so, you may be able to lower your costs to avoid reaching the coverage gap threshold of $3,310 ($3,700 in 2017).

For a few others, there may be another way to avoid the coverage gap. However, since this method is a rarer approach (it won’t apply to most Medicare Part D recipients)—and because it is a trade secret—we won’t go into detail on this one. (Sorry for the tease on this approach.)

The Good News: 2020 Is Approaching!

If there is any other good news about the dreaded donut hole, it is that the coverage gap is scheduled to be eliminated in 2020. That would mean that after meeting the annual deductible for your medications, your cost of your medications on a Medicare Part D drug plan will simply be 25%, which will apply to everyone. No more donut hole! (Can someone lead a cheer here?)

I held this piece of information till last, because, in dealing with a depressing subject like the dreaded donut hole (coverage gap), I feel it is important to end on a note of hope. So, here’s looking to 2020.


January ShubertJanuary Shubert
13:50 08 Apr 24
Excellent customer service. Professional and knowledgeable. Received what I needed and wanted at a reasonable price.
Melton TimmonsMelton Timmons
23:05 05 Apr 24
John is a great person first. As an agent he is very knowledgeable of the products and services he offers. For every question I had, he provided answers and solutions. I am very comfortable with him and if you need a capable agent, please contact John Claeys.
Rosa MartinRosa Martin
21:53 05 Apr 24
John is a very knowledgeable person in his profession. He has helped my husband, my sister, and myself to find the best affordable insurance for each of us…He made navigating through Medicare a breeze for me. He is willing to help in any way and any time of the day.Thank you John for all your help.
Johnny CoffmanJohnny Coffman
16:33 05 Apr 24
He explained the ins and outs of how Medicare works and clarified the confusion. Highly recommend John Claeys!
Mark BleuerMark Bleuer
22:48 03 Apr 24
John is very professional and courteous. His knowledge and attention to detail is exemplary. I can highly recommend Claeys Group Insurance. He does a great job.
sheila Rhynesheila Rhyne
14:58 03 Apr 24
I have had excellent customer service.Claeys insurance company has helped me for several years now and he does a wonderful job setting me up with the right insurance that fits my needs .I really appreciate the job he does and Thank you again.
Scott GillScott Gill
00:34 03 Apr 24
Highly professional with attention to detail. Felt like John was genuinely interested in matching my needs to the various options.
Karen DeemKaren Deem
21:02 02 Apr 24
John was very pleasant and professional. Medicare can be very confusing. He had all the answers for me.
Beth HamillBeth Hamill
17:52 02 Apr 24
I am so thankful for John's help and kindness...he explains everything so clearly and I feel confident that he is truthful and finding the best plan for me.
Margie FisherMargie Fisher
22:38 13 Feb 24
My husband and I have used John's services for several years, as do many of our friends. At no time has his recommendations let us down. He is kind, patient in making sure we understand our choices and was there for any and all questions afterwards. He would be our ONLY choice when it's your turn to use his insurance services. He will not let you down. What a professional! 🙂
Jerry JonesJerry Jones
02:27 08 Feb 24
John was very helpful in guiding me through the medicare choices. He explained everything thoroughly and answered all my questions.
marvitta hallmarvitta hall
23:31 07 Feb 24
Tonda SammonsTonda Sammons
21:26 07 Feb 24
Judy CraftonJudy Crafton
20:54 07 Feb 24
Mr. Claesy, was a pleasure to work with on just a short time table, my not paying attention to dates for Medicare changes! We really appreciated his response and meeting personally with us. We highly recommend him for your insurance needs. Thanks again for doing a wonderful service.
Dannie SkipperDannie Skipper
20:50 07 Feb 24
John was very helpful in selecting insurance companies for Roy. He demonstrated that he was very knowledgeable about what was available and what was needed. He made recommendations, provided details, and gave good advice to us. He was flexible and did what we asked of him to complete the process of selecting the best insurance companies for the situation. We are grateful for his help and pleased with the results.
KevinKevin
14:47 24 Jan 24
John is a very knowledgeable subject matter expert and is thorough in his approach. He takes time breaking down and explaining what can be a somewhat complex subject and helps makes it easier to understand! John always has the best interests of his clients guiding his recommendations. We have found John's advice to be extremely helpful and would recommend him to anyone seeking health insurance.
Laura BogenschutzLaura Bogenschutz
18:06 21 Jan 24
John Claeys is the best! He has helped my husband and I tremendously with our Medicare and supplement coverage! He breaks it down to where you can understand it! We would be so confused without John!! Thank you John for being there for us!!
Thompson FamilyThompson Family
15:46 18 Jan 24
John Claeys is one of the most knowledgeable individuals on Medicare and supplemental insurance plans you can ever find. Not only is he very personable he also stays involved from year to year to ensure you have the best policies for your current needs.
Ingrid FauskeeIngrid Fauskee
23:21 17 Jan 24
I just got a Medicare plan through John Claeys. I was getting a lot of mail about Medicare and was so confused. Some friends told me about John so I emailed him and he contacted me right away.. He was amazing! He went through everything with me, he explained every detail and was so patient with all my questions . So grateful to him for all he did. Thank you John.😁
John Claeys helped me understand the in's and out's of Medicare. He found the best insurance and prescription plan to best suit my needs at an affordable price.Thank you John!Laurie Boriskie
Marsha AllenMarsha Allen
16:55 24 Oct 23
My experience with John was definitely 5 Star! He explained everything thoroughly, and simply. He answered all my questions regarding Medicare completely. I would absolutely recommend John, without reservation.
js_loader
by:

Leave a Reply