The “donut hole” is also known as the coverage gap. It pertains only to your Medicare Part D Prescription Drug Plan (also known as “Medicare Part D”, “PDP” and “Doughnut Hole”). The donut hole does not involve Medicare’s medical or hospital coverage. In other words, original Medicare Part A, Part B and Medicare Supplements plans do not have a donut hole. The donut hole, or coverage gap, begins after you and your Prescription Drug Plan have spent a certain amount for covered drugs. Individuals who are dual-eligible, or receiving assistance through State Medicaid, are excluded from the coverage gap, or donut hole.
In 2012 and 2013 the coverage gap begins, or will begin, when the amount paid by you and your Prescription Drug Plan reaches $2970.00. You are in the donut hole until your prescription drugs expenses total $4750.00.
The prescriptions expenses that count toward the donut hole:
- Your yearly deductible, coinsurance and copayments.
- The discount you get on covered brand name drugs in the coverage gap.
- What you pay in the coverage gap.
Items that do not count toward the donut hole include:
- Prescription Drug Plan premiums.
- Prescription drugs that are not covered (or not on the formulary).
- Over-the-counter medications.
- Prescription ordered from outside the U.S., like Canada.
What Happens When I Reach the Medicare Part D Donut Hole?
Once you have entered the coverage gap or donut hole there is a temporary limit to what your Prescription Drug Plan will pay. You will no longer pay co-payments or co-insurances identified in your Prescription Drug Plan. However the discount is dependent on whether your prescription drug is a generic drug or a brand name drug. In 2012, once you have entered the coverage gap, you received a 50% discount on covered brand-name drugs and an 86% discount of the Prescription Drug Plan’s cost for covered generic drugs until you have reached the end of the coverage gap. However, there has been a change with regard to the discounts received during the coverage gap, or donut hole, for 2013. In 2013 while you are in the donut hole you will pay 47.5% of your Prescription Drug Plan’s cost for covered brand name prescription drugs and 79% of your Prescription Drug Plan’s cost for covered generic drugs. There will be increasing coverage for drugs in the coverage gap each year until the gap closes in 2020.
What Happens After the Donut Hole?
Once you get out of the coverage gap, you automatically get “catastrophic coverage.” Catastrophic coverage is your safety net. The catastrophic coverage assures that you only pay a small co-insurance amount or copayment for covered drugs for the rest of the year.
The Donut Hole Example Scenario:
You have three prescription drugs and two are covered under your Prescription Drug Plan because they are on the formulary and one is not covered because it is not on the formulary. When adding the amount of true out-of-pocket expenses that count toward entering the donut hole, you would only count the two prescriptions that are covered or on the Prescription Drug Plan’s formulary. The third medication, or the one that is not covered on the Prescription Drug Plan’s formulary, is not added together with the covered drugs and is not considered in determining your true out-of-pocket expenses that would put you in the donut hole. Over-the-counter medications are not counted toward your true out-of-pocket expenses because they are not covered by your Prescription Drug Plan.
The following example may better explain true out-of-pocket expenses which count toward entering the donut hole:
If you pay $20.00 for one prescription and $10.00 for another prescription and they are both on your Prescription Drug Plan’s formulary, then these two amounts are added together for the purpose of calculating your true out-of-pocket expenses that would put you in the donut hole. However, if you pay $270.00 toward the prescription drug that is not on the formulary, then this amount is not counted toward your true out-of-pocket expenses and, therefore, is not considered a true out-of-pocket expense that would put you in the donut hole. Thus, out of the three prescriptions identified herein, on $30.00 would be count toward your overall true out-of-pocket expenses.
Medicare Pathways, Inc.