Medicare Part D can be confusing with it’s many tiers and coverage stages. A common source of confusion is the Medicare Prescription Drug Plan Part D coverage gap, commonly referred to as the “Donut Hole”. It is important to know the limits on what a drug plan will cover for prescription drugs before the coverage gap kicks in. This will help you explain potential out-of-pocket costs your clients could incur for particular prescriptions in any given year. Here is a brief explanation on the Medicare Part D coverage gap to help clarify how the coverage gap works.
**All amounts have been updated with the 2023 Medicare prescription drug amounts.**
What is the Medicare Part D “Donut Hole”? Medicare Part D has an initial coverage limit on how much most Medicare Part D Prescription Drug Plans will cover. In the initial coverage period, the plan will pay a higher coinsurance amount for prescription drugs and they pay a smaller portion after meeting the plan’s deductible. Once the beneficiary and the plan have spent a total of $4,660 on prescription drugs, they enter the coverage gap (Donut Hole). Once the beneficiary reaches the coverage gap, they will pay no more than 25% of the plan’s covered generic and brand-name prescription drugs. Some plans may offer you even lower costs in the coverage gap. It is important to note, people who get Social Security Extra Help paying Part D costs won’t enter the coverage gap.
When do you leave the Donut Hole? The coverage gap will end after the beneficiary’s out-of-pocket expenses total $7,400. This out-of-pocket expense total is referred to as TROOP (True out of pocket cost). While in the donut hole, ALL of what they pay for Name Brand drugs, ALL of what they pay for Generic Drugs and MOST of what the drug manufacturer pays for Name Brand drugs count toward the TROOP. Once they reach the TROOP of $7,400, they will enter catastrophic coverage. During catastrophic coverage, they will pay the greater of 5% coinsurance or $4.15 copay for generic and 10.35 copay for all other drugs.
What Resources are available? There are Medicare Prescription Drug Plans and Medicare Advantage Plans that offer coverage for some prescriptions while they are in the “donut hole”. Help the beneficiary shop and compare plans carefully for the plan that best meets their needs. In addition, any Medicare Eligible Beneficiary can apply for extra help with prescription drug coverage by applying online at www.ssa.gov/extrahelp. Income and asset limits apply.
When is the deadline to choose a new Medicare Prescription Drug plan? The Annual Enrollment Period ends on December 7th. During the Annual Election Period, you can select a plan between October 15 to December 7 for January coverage start date.