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Understanding the Medicare Donut Hole


If you are new to Medicare or planning to enroll soon, you’ll want to understand the Medicare Part D coverage gap – also known as the Medicare donut hole. This gap in prescription drug coverage affects the majority of Medicare members, and often increases the out-of-pocket expenses that beneficiaries pay for their medications.

However, recent changes to the Medicare coverage gap are beginning to make prescription drug coverage more consistent and manageable, according to Heather Adams, government compliance pharmacist with Highmark. “As we move through 2020 and into 2021, closing this donut hole helps reduce costs in the coverage gap,” says Adams. “Plans are starting to pay more, while members are paying less.”

To better understand your prescription drug coverage, check out the following answers to common questions about the Medicare donut hole:

What exactly is the Medicare Part D coverage gap?

The donut hole is an interruption, or temporary change, in prescription drug coverage that exists after the Medicare Part D initial coverage phase and before the catastrophic coverage phase. During the initial coverage phase, you’ll pay your plan’s set copayment or coinsurance. However, if the total of what you and your drug plan pay for your medications reaches the coverage limit ($4,020 in 2020), you’ll enter the coverage gap. Then, instead of paying your copayment or coinsurance, you’ll pay a set percentage of the total cost of your drug. Once your out-of-pocket spending reaches the predetermined threshold ($6,350 in 2020), you’ll exit the coverage gap and enter the catastrophic coverage phase, where you will only pay a low copayment or coinsurance for prescription drugs.

What will 2021 bring for the Medicare Part D coverage gap?

While the changes made in 2020 for brand name drugs are permanent, 2021 brings changes to spending limits and the amount you are paying for generic medications. Changes that will affect the coverage gap in 2021 include:
•  The initial coverage phase limit increases to $4,130, so it will take you longer to reach the coverage gap.
•  The donut hole closes for generic drugs, meaning that you will now pay no more than 25% of the total price for generic medications. Just as in 2020, the amount you pay (25%) will count toward your total out-of-pocket costs.
•  The total out-of-pocket threshold for the coverage gap is $6,550. Once you reach this amount, you are out of the donut hole and catastrophic coverage begins. Once a member is in catastrophic coverage, their medications will be covered at 95%  and they will only pay 5% for the remainder of the year , or $3.70 for your generics and $9.20 for brand name drugs, whichever is more.

What steps can I take to avoid the donut hole?

The closing of the donut hole for generic drugs in 2021 will help drug coverage to be more manageable, according to Adams. It will minimize the effects some members feel when switching from paying a copay/coinsurance to paying the percentages when in the donut hole.  But to keep prescription costs down and delay the coverage gap, Adams recommends taking these steps:
•  Ask your physician or pharmacist if there is a generic drug available for your prescriptions. Until the generic drug donut hole closes next year,  check with your insurance to see whether the brand name or generic drug is more cost effective, or if there is a similar medication for the same medical condition available at a lower cost.
•  Check to see which pharmacies your insurance covers and be mindful of where you are getting your medications filled. Whether you choose retail or mail-order, prescriptions filled by a preferred vendor tend to cost less.

 

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