Ok, this “donut hole” isn’t like the delicious ones over at Gibson’s or Krispy Kreme. While it has a yummy name, it’s a less-than-desirable place to be. This week, we’ll explain what the Medicare Part D “donut hole” is, how to avoid it, and other tips you need to know.
If you have other questions about your Medicare coverage, you can always go to our frequently asked questions page, call our knowledgeable Medicare agents, or email us at firstname.lastname@example.org. We look forward to hearing from you and helping you navigate your Medicare.
2022 Medicare Donut Hole
As if Medicare wasn’t confusing enough, now enter the donut hole. The Medicare “donut hole” refers to Medicare Part D’s coverage gap. It was originally called this because the Part D gap was a huge hole right in the center of prescription drug coverage during the year. Medicare Part D has four stages:
Annual Deductible - This begins with your first prescription of the calendar year. You will pay the full cost of your prescription until you hit your deductible. If you have no deductible in your Part D plan, you skip step 1 and go straight to step 2. Note that tier 1 and tier 2 medications are not subject to the deductible.
Initial Coverage - This stage begins instantly if you have a $0 deductible, or it begins once you’ve hit your deductible in stage 1. During this stage, your plan will pay a part of your prescription if it is included in your plan’s formulary. When the amount spent by you and your plan equals the Medicare initial coverage limit, this stage ends. In 2022, the initial coverage limit is $4,430.
Coverage Gap (the donut hole) - You enter this stage when you and your plan have hit the Medicare initial coverage limit of $4,430. Some people will never enter the donut hole, but if you do, your plan will be temporarily limited in the amount it can pay for your medications.
Catastrophic Coverage - You enter this stage if your out-of-pocket drug costs reach $7,050 in 2022. During this phase, you’ll pay 5% of the cost of the drug. Your plan and the government will cover the rest. If you enter this stage, you’ll stay here for the remainder of the calendar year.
Costs in the Donut Hole
Whether you ever enter the donut hole depends on your specific Part D plan, your prescriptions, and the tier that your drugs fall into. How much you’ll pay while in the Medicare Part D donut hole also depends on your plan, prescriptions, and drug tiers. In 2022, once you and your insurance provider have spent $4,430, you will cross the threshold into the donut hole. Once entered into the donut hole, you’ll continue to pay 25% of both brand-name and generic drug costs.
During your time in the donut hole, your drug expenses plus the amount your plan covers continues to be added up. Once you’ve reached $7,050 in 2022 of total out-of-pocket drug expenses, you’ll exit the gap. Then, your medication expenses will be calculated within the Catastrophic Coverage stage of Part D.
How Do I Avoid the Donut Hole or Get Out of It?
Once you’re in the donut hole, you will exit it once you enter the Catastrophic Coverage stage when you hit $7,050 in 2022 out-of-pocket drug costs. In stage 5, you’ll pay 5% or a small copay for your medication costs for the rest of the year. Once you enter the donut hole, the only way to exit it is to pay your out-of-pocket drug costs until you enter the next stage.
To avoid the Part D coverage gap in the first place, try to stay in stage 2 Initial Coverage by not exceeding Medicare’s 2022 Initial Coverage limit of $4,430. Here are some ways to stay in stage 2:
Ask your doctor for generic drug options whenever possible
Work with your doctor to cut your medication expenses
Bring a list of your medications to your doctor to see if she/he recommends any less expensive options; there may not be a generic option, but there may be another medication that you can take that does the same thing
Shop pharmacies to ensure you’re getting the best price
Look into prescription card discounts and other features that may be available, like GoodRx
Work with your Medicare consultant at Delta Medicare Benefits Group to choose the right Part D plan for you; we’ll look at factors like copays, deductibles, and limits when helping you decide on the right plan for you.
When Will the Donut Hole Go Away?
Part D was created to cover the majority of your prescription costs. Some people have medication costs that well exceed the average medication spend. Those people must pay a greater amount within their Part D when they enter stage 3, which is also known as the donut hole. This was initially implemented to encourage people to use more generic drugs and to cut government spending with Medicare Part D.
In 2010, the Affordable Care Act slowly began to decrease the coverage gap in Part D. Today, when you enter the gap, you pay no more than 25%. Before the Affordable Care Act, people paid 100% of their prescription costs while in the donut hole. Presently, the donut hole still exists, though it has been shrinking for over a decade. We may continue to see the donut hole shrink, depending on Medicare decisions going forward.
Other Frequently Asked Questions About the Donut Hole
In this section, we’ll answer a few frequently asked questions we hear from our clients.
Is There a Plan I Can Purchase That Gets Rid of the Donut Hole Gap?
No, in most states, there is no plan or separate insurance that you can purchase that will completely get rid of the donut hole. However, depending on your income and location, there are certain assistance programs that may exist for you, including Extra Help for Part D. You can apply for the subsidy by visiting the Social Security office’s website. If you qualify, Medicare will waive your Medicare coverage gap, and you may pay less in other stages.
What About a Specific Medicare Advantage Plan?
A Medicare Advantage plan will not completely get rid of the donut hole for you. Part D works the same way in an Advantage plan that it does within Original Medicare. While some Medicare Advantage plans may pay for certain medications while you are in the gap, these drugs are typically generic. Note that you may stay in the donut hole longer in this case.
How Will I Know If I Enter the Medicare Donut Hole?
If you enter the donut hole, you will know by checking your plan’s explanation of benefits. Your Part D provider will send this statement monthly, outlining exactly how much you’ve spent on medications and how much you have left before you enter the coverage gap. You will get notices from your insurance company within all stages of Medicare Part D. If you’ve entered the gap, you will know when you exit it by reviewing these notices.
If I Am Already Receiving Drug-Cost Assistance, Like Extra Help, Will I Enter the Donut Hole?
If you are receiving assistance like Extra Help, you will pay less for your prescriptions, which will allow you to stay out of the donut hole for a longer period than those not getting help.
Why Are My Prescriptions More Costly Within the Donut Hole?
You may see an increase in a prescription’s cost when you enter the Medicare coverage gap. This depends on your specific plan and medications.
What Expenses Count Towards Entering the Donut Hole?
Your medication’s total cost, according to your plan’s formulary, will be added up until you hit Medicare’s Initial Coverage Limit of $4,430. This will be what you pay and what your plan pays. For example, if your prescription costs $100 according to your plan’s formulary, your copay is $25, and your plan takes care of the remaining $75, $100 will count towards your Initial Coverage Limit.