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Medicare Part D Coverage

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Donut holes are delicious, but the Medicare Part D “donut hole” is not quite as palatable. Before 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—reach a specific limit. In 2020, that limit was $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 medications. 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, suppose 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 paid $6,350 in 2020 in out-of-pocket costs. When you hit this threshold, you reach catastrophic coverage, and out-of-pocket costs significantly drop. This does not mean what you and the Medicare plan have paid together, but only what you have paid.

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

Suppose you wonder where you are regarding getting out of the donut hole. In that case, your Part D plan should track 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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