“The Medicare Donut Hole is really a second deductible for prescription costs.”
The Medicare “Donut Hole” is a gap in Medicare Part D coverage for prescription medications. The Donut Hole, deductibles and other terms can change every year. The question is, what is the Medicare “Donut Hole” for the year 2017?
The Medicare Donut Hole is really a second deductible for prescription costs.
If you are on Medicare, you pay for the first $400 of prescription medicine yourself, because Medicare Part D has a $400 deductible. (If your plan has a $0 deductible, then you skip this step.) This is your first deductible. For the first $3,700 of prescription medication costs, you will pay 25% of the retail cost. Once you reach $3,700 in drug expenses, the amount you pay skyrockets. This is the Donut Hole or the Medicare Part D coverage gap. The coverage gap does not apply to people who receive Medicare Extra Help.
The Donut Hole Discount
Congress enacted some financial relief in 2011, when they created the “Donut Hole Discount.” Thanks to the discount, you only pay a portion of the price of your medicine while in the Donut Hole. In 2017, the Donut Hole Discount is 49%. So, if you have $1,000 of prescription drugs, you will only have to pay $510 while in the Donut Hole. Before the Donut Hole Discount, you had to pay 100% of the retail cost of your prescription medications, while in the Donut Hole.
If your medication costs in 2017 are over $4,950, Medicare will jump in and help you again. But Medicare will only help with the costs that are over $4,950. Medicare does not go back and reimburse you for any of the “Donut Hole” bills. For any medication after you reach the $4,950 point, you will only have to pay 5% of the retail cost.
Think of it as steps
It is easier to visualize this, if you think of the Medicare Part D prescription drug coverage as steps, instead of as a donut. The dollar amounts are based on the retail price of your medications, not on the portion you paid.
Step One: $0 to $400 (or whatever your deductible is) – you pay 100% of the retail cost of your medications.
Step Two: After your deductible to $3,700 – you pay 25% of the retail cost of your medications.
Step Three: $3,700 to $4,950 - The dreaded Donut Hole – you pay 51% of the retail cost of your generic medications and up to 40% of the retail cost of brand-name medications.
Step Four: $4,950 and up – you pay 5% of the retail cost of your medications.
What counts toward the Donut Hole?
The amount you pay for copayments, deductible, and coinsurance
The amount you pay for brand-name and generic drugs in the Donut Hole
The discount you get on brand-name drugs in the Donut Hole
What does not count toward the Donut Hole?
The cost of your Plan D premiums
Dispensing fees that the pharmacy charges
The discount you get on generic drugs in the Donut Hole
Government regulations are constantly changing. Every state administers government benefit programs differently. To find out all the benefits that are available to you, talk with an elder law attorney in your area.
Medicare.gov. “Costs in the coverage gap.” (accessed July 25, 2017) https://www.medicare.gov/part-d/costs/coverage-gap/part-d-coverage-gap.html
Q1Medicare.com. “An explanation of the 2017 Medicare Part D Coverage Gap or Donut Hole.” (accessed July 25, 2017) https://q1medicare.com/q1group/MedicareAdvantagePartD/Blog.php?blog=An-explanation-of-the-2017-Medicare-Part-D-Coverage-Gap-or-Donut-Hole-&blog_id=575&frompage=9
National Council on Aging. “Donut Hole: The Medicare Part D Coverage Gap Illustrated.” (accessed July 25, 2017) https://www.ncoa.org/resources/donut-hole-the-medicare-part-d-coverage-gap-illustrated/