Quick Answer: The Donut Hole refers to a gap in prescription drug coverage under Medicare Part D.
All Medicare Part D prescription drug plans have four stages. At the beginning of each year, Medicare announces how much money beneficiaries will have to spend to move through each coverage stage. These thresholds and the amount that beneficiaries pay in the gap changes annually in an effort to eliminate the gap.
Typically, once coverage begins at the start of the year, you enter the first stage of the Medicare Part D prescription drug plan known as the Deductible stage. Here, a Medicare beneficiary will be required to pay 100% of all prescription drug costs until the deductible is met. If you are a Medicare SilverScript member, those plans do not require a deductible of any kind, and you skip that stage altogether and go to stage two called the Initial Coverage stage.
After you meet your deductible, you move to the Initial Coverage stage. In this stage, your plan will help pay towards your covered prescriptions. A Medicare Part D prescription drug plan beneficiary will pay a copayment or coinsurance and Medicare Part D will take care of the remaining balance of the drugs.
Once a beneficiary hits the $3,280 threshold, they enter what is known as the Medicare Donut Hole. While in the Donut Hole, a beneficiary will be required to pay 25% of all brand-name drugs and 37% for generics for 2019. An amount that could be significantly more than what you were paying before you hit the Donut Hole.
The final part is referred to as the Catastrophic coverage stage – a stage that is reached once you have paid $5,100 in out-of-pocket costs for covered drugs. During this final stage of the Medicare Part D prescription drug plan, beneficiaries will be required to only pay a significantly lower copayment or coinsurance for their drugs, all the way until the end of the plan year. Once the plan year is over, all Medicare beneficiaries in the Part D prescription drug plan will revert to the Deductible stage.
Millions of Medicare Part D beneficiaries will be relieved to know that the Medicare Part D coverage gap, also known as the Donut Hole, will be closing the gap earlier than expected. The Donut Hole has been an issue for many Part D beneficiaries and their brand name prescriptions.
The federal government has been looking for ways to close this gap by lowering the percentage of beneficiaries pay during the Donut Hole period. Previously, the gap was scheduled to close in 2020. As a result of the budget deal signed by President Trump in early 2018, this relieves for brand-name medication comes a year earlier.
In 2018, whilst in the Donut Hole stage, Medicare Plan D beneficiaries had to pay 35% of the cost of brand name medication. It was initially planned for the share to be reduced to 30% in 2019 and 25% in 2020, but from 2019 beneficiaries will pay 25% on brand name medication, a year earlier than planned.
For generic medication, the phase-out process of the Donut Hole has not changed. Beneficiaries paid 44% of the cost in 2018, 37% in 2019 and this will be reduced to 25% in 2020.
So starting on January 1, 2020, the Donut Hole will be closed completely. People will not pay more than 25% for brand-name and generic drugs. This is the same amount that you pay from the time your deductible is met to the point you reach the out-of-pocket spending limit.
Some Medicare Part D plans provide coverage when people enter the coverage gap. The benefits are usually limited to certain prescriptions. These plans also typically have higher monthly premiums.
People can avoid the coverage gap if they qualify for Extra Help or an assistance program in their state of residency. Those with limited assets and incomes below the threshold can qualify. Guidelines vary by state, so those who need help determining if they qualify can speak to an insurance agent.
It is possible to get a Medicare Advantage Plan that covers the Donut Hole. Again, these plans usually have higher premiums and restrictions on medications.
Fortunately, the Donut Hole is becoming a thing of the past. If you need help finding a plan that provides the coverage you need, contact a licensed insurance agent today.
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