The Donut Hole
Medicare Coverage Gap Made Easy
WHAT IS ‘THE DONUT HOLE’?
The Medicare Part D coverage gap, also known as the “donut hole” is a benefit structure that applies both to stand-alone Medicare Prescription Drug Plans and Medicare Advantage Prescription Drug plans, however, not everyone enters it. If you’re presently or will sometime in the future be taking medications or are concerned about lowering your prescription drug costs, it may be helpful for you to understand what the Medicare ‘Donut Hole’ is and ways to avoid it.
2021 Donut Hole (Coverage Gap) Explained
The coverage gap commonly referred to as “The Donut Hole” has several phases.
The coverage gap is a temporary limit on what most Part D Prescription Drug Plans or Medicare Advantage Prescription Drug plans pay for prescription drug costs. While you’re in the coverage gap, you might pay higher costs for brand-name and generic drugs. Below we’ve described each phase:
Deductible phase: For most stand-alone Medicare Prescription Drug Plans and Medicare Advantage Prescription Drug plans, you’ll pay 100% for medication costs until you reach the yearly deductible amount (if your plan has one). The standard deductible for 2021 is $445.
Initial coverage phase: After you’ve reached the deductible, you’ll enter the initial coverage phase, where you will pay the plan’s cost share for covered medications. For example, if your plan benefit includes a 25% coinsurance in this phase and you’re taking a medication that costs $400 a month, your out-of-pocket cost would be approximately $100 a month.
Coverage gap, also known as the “donut hole”: begins if you and your plan spend a combined $4,130 in 2021 as described above. While in the coverage gap, you’ll typically pay 25% of the plan’s cost for brand-name drugs and for generic drugs in 2021. You’re out of the coverage gap once your yearly out-of-pocket drug costs reach $6550 in 2021.
Catastrophic coverage phase: Begins if your out-of-pocket costs reach $6550 in 2021. During the catastrophic coverage phase, you’ll only pay a small coinsurance or copayment for covered prescription drugs for the remainder of the year.
Learn about the Medicare Part D Late Enrollment Penalty Here
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