Understanding the Medicare Donut Hole

This story was originally posted on June 6, 2017, and updated on July 13, 2017.

A recent study by the University of Illinois at Urbana-Champaign shares that mortality rates have decreased 2.2% annually since Medicare Part D prescription drug coverage began in 2003. This is good news for Medicare beneficiaries because it shows that the Medicare Part D program is working and is worth signing up for as supplemental insurance to Original Medicare. Still, it doesn’t mean that prescription drug prices will stop rising or that the coverage gap, aka the “donut hole,” is any easier to navigate when it comes to out-of-pocket costs.

Understanding Medicare is not always easy, especially when it comes to specific aspects of your health insurance benefits such as enrollment and costs. Take, for instance, the Medicare Part D prescription drug coverage gap. Also known as the Medicare “donut hole.”

 

What is the Medicare Part D donut hole?

Basically, the donut hole is a coverage gap in Medicare Part D for the costs of prescribed medicine. This coverage gap is the amount of time between when a Medicare beneficiary’s payments for prescription drug costs remains in the initial coverage limit and when the patient’s payments reach the government-set “catastrophic” limit.

When does the coverage gap happen?

The coverage gap begins once you leave the initial coverage stage and ends when you spend a total of $3,700 out of pocket in 2017. If you reach the gap in 2017, you will pay no more than 40% on covered brand-name prescription drugs and receive a 49% discount on covered generic drugs. Under the Affordable Care Act provisions, there will be additional discounts in the coverage gap each year through 2020, when the coverage gap will be closed entirely, and you will have continuous Medicare Part D Prescription Drug coverage.

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Once you have reached the out-of-pocket limit in the coverage gap, you qualify for catastrophic coverage. You pay only a small copayment or coinsurance for covered drugs for the remainder of the year in this stage. Only a small percentage of beneficiaries reach the catastrophic coverage stage each year.

Still have questions about the Medicare donut hole and need the prescription drug coverage cap explained a bit more? Checkout this infographic below to get a better understanding of the Medicare Donut Hole.

MediCare_Gap_InfoGraphic

 

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Medicare World Editorial Team

The Medicare World editorial team works diligently to make sure our stories are informative, unbiased, and of utmost relevance to our readers. Our team of researchers and writers presents the best and latest information on all things Medicare, including legislation, enrollment rules, changes in coverage and costs, and health information. We enjoy keeping our readers up-to-date and helping them navigate the often-complicated Medicare maze.

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