Medicare Part D Coverage

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Donut holes are delicious, but the Medicare Part D “donut hole” is not quite as palatable. Prior to this year, the “donut hole” is a coverage gap, the phase of Part D coverage after your initial coverage period. You enter the donut hole when your total drug costs—including what you and your plan have paid for your drugs—reaches a certain limit. In 2020, that limit is $4,020. While in the coverage gap, you are responsible for a percentage of the cost of your drugs.

Fortunately, the donut hole was closed for all drugs in 2020, meaning that when you enter the coverage gap you will be responsible for 25% of the cost of your drugs. In the past, you were responsible for a higher percentage of the cost of your drugs.

Although the donut hole has closed, you may still see a difference in cost between the initial coverage period and the donut hole. For example, if a drug’s total cost is $100 and you pay your plan’s $20 copay during the initial coverage period, you will be responsible for paying $25 (25% of $100) during the coverage gap.

The only real way out of the donut hole is after you have paid $6,350 in 2020 in out-of-pocket costs. This does not mean what you and Medicare plan have paid together, but only what you have paid. When you hit this threshold, you reach what is called catastrophic coverage, and out-of-pocket costs significantly drop.

During catastrophic coverage, you will pay 5% of the cost for each of your drugs, or $3.60 for generics and $8.95 for brand-name drugs (whichever is greater).

If you wonder where you are in regards to getting out of the donut hole, your Part D plan should keep track of how much money you have spent out of pocket for covered drugs and your progression through coverage periods—and this information should appear in your monthly statements.

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