What is the Medicare Part D Donut Hole?

The term “donut hole” often refers to the coverage gap within Medicare Part D Prescription Drug plans. If you’re new to Medicare, you might not be familiar with this term.

The donut hole, in short, refers to where a Medicare Part D Prescription Drug Plan reaches its limit on what it covers for prescription drugs. In a calendar year, you reach this coverage gap once your Medicare Part D plan has spent a certain amount on prescription drugs. In 2023, this amount will be $4,660.

Not everyone enters the donut hole, and beneficiaries with Extra Help will never enter the donut hole.

What will happen if I reach the “donut hole?”

Once you have reached the “donut hole” coverage gap, your out-of-pocket costs for brand name and generic drugs covered in your Medicare Part D Prescription Drug plan will change. Details of those changes are listed below:

• For Generic Prescription Drugs
  • You will pay 25% of the price; Medicare will pay 75%
  • Only the costs you pay count to get you out of the “donut hole.”
• For Brand-Name Prescription Drugs
  • You will pay at most 25% of the cost of the drug and 25% of the dispensing fee.
  • If you buy your prescriptions via pharmacy or mail, you will pay a discounted price
  • Both what you pay and what the drug manufacturer pays (95%) count towards getting you out of the donut hole.

Note: Depending on your plan, you may have coverage in the “donut hole.” If so, you will get a discount once your coverage has been applied to the prescription drug’s price.

Will the “donut hole” go away?

Medicare Part D Prescription Drug plans have fourth payment stages, and the “donut hole” is the third. You move through the four stages based on how much you, your plan, and anyone on your behalf have paid for your prescription drugs throughout the year.

How do I leave the “donut hole?”

Your out-of-pocket costs must reach $6,550 to leave the “donut hole.” After the “donut hole,” you enter the fourth stage – catastrophic coverage. In this stage, your Medicare Part D Prescription Drug plan covers the majority of the cost of your drugs. You will remain in this stage for the rest of the year.

Costs that count towards the dollar limits include:

• Copays and coinsurance
• Your deductible
• What your plan pays during the initial coverage stage
• Manufacturers’ discounts provided in the coverage gap stage
• Amounts paid on your behalf, such as those through a financial assistance program – at any stage

Coverage Gap Tips

It is best to avoid entering the “donut hole” if possible. However, for those who do, navigating it wisely can help a beneficiary get the most from a Medicare Part D Prescription Drug plan. Here are some tips to help you mitigate prescription drug costs, even if you never enter the “donut hole.”

Tip 1: Estimate your annual prescription drug costs ahead of time. This can help you plan and prepare to pay for your prescription drugs if you are likely to enter the “donut hole.”

Tip 2: Discuss lower-cost drug alternatives with your providers and pharmacists.

Tip 3: Look for options where you may be able to get your prescription drugs for discounted costs.

Tip 4: When possible, opt for generic drugs instead of brand-name.

Tip 5: Make sure you are using an in-network pharmacy.

Understanding the coverage stages of Medicare Part D Prescription Drug plans can make everything seem less overwhelming. If you have questions or want a no-cost, no-obligation coverage review, reach out to Seniorstar Insurance Group today!