The donut hole is more formally known as the Medicare Part D coverage gap. During the prescription drug coverage gap, beneficiaries notice a higher cost in out-of-pocket expenses than in the other stages.

The gap in coverage is intended to encourage beneficiaries to use generic drug alternatives that are less expensive, costing the Part D program less money.

What is the Donut Hole in Medicare?

The Medicare donut hole is a coverage gap in Part D prescription plans. During this phase of coverage, the cost of medicine can be higher than during other phases of Part D coverage.

How Does the Medicare Part D Donut Hole Work?

After the deductible, you’ll enter the Initial Coverage phase. During the Initial Coverage phase, you pay copays for your prescriptions until the total cost of your medications reaches the threshold that puts you in the donut hole.

To get out of the donut hole you’ll pay a certain percentage of your prescriptions until the total cost reaches the threshold that puts you in the Catastrophic Coverage phase through the end of the year.

Phases of the Medicare Donut Hole (Coverage Gap)

What Costs Count Toward the Coverage Gap?

The total cost of medications counts towards entering and exiting the coverage gap. The total cost of your medications includes the portion that you pay for your prescriptions as well as the portion the plan pays for your prescriptions.

When exiting the donut hole the total cost of the drug includes what you, your plan, and the manufacturer pay. So, the manufacturer pays 70%, your plan pays 5% of the cost, and you pay 25%.

95% of the cost of the drug counts toward out-of-pocket spending. The total cost only applies to medications on your plan’s formulary.

Costs that do not count toward the coverage gap include premiums and drugs that aren’t covered.

Do all Part D Plans Have a Donut Hole?

All Part D plans have a donut hole or coverage gap. The thing is, not everyone reaches the donut hole. Out of 45,000,000 Part D beneficiaries, only around 4,800,000 enter the donut hole.

Do Medicare Advantage Plans Cover the Donut Hole?

If there’s prescription coverage, you know there will be a coverage gap or donut hole. There is no exception to Medicare Advantage plans, these Part C policies include a coverage gap just like the standalone Part D plans.

How Can I Avoid the Donut Hole?

Avoiding the Medicare donut hole might not be possible in all cases. However, there are ways to reduce the likelihood of entering this phase.

Comparing plans yearly during the Annual Enrollment Period will ensure your policy is still the most beneficial plan is the most important thing you can do for yourself.

Next, consider using generic medications. It’s understandable this isn’t an option in all cases and it’s best to consult a physician before making the switch, but talking to your doctor can save you money.

Compare the cost of your prescriptions at different pharmacies or consider checking the cost of your drugs online. Many Part D plans have a mail-order pharmacy option that can save you quite a bit of money.

Other ways to avoid the donut hole include asking drug manufacturers about coupons, considering applying for Extra Help, or Pharmaceutical Assistance Programs.

Is there Insurance that Covers the Donut Hole?

There is no additional policy you can buy to have donut hole insurance. Avoiding the coverage gap altogether is what most people suggest. However, in many cases, it can be hard to avoid the coverage gap.

If avoiding the coverage gap has been a mountain you can’t seem to climb, consider calling your prescription drug manufacturers and asking about manufacturer coupons.

Also, price checking your drugs online to make sure you’re getting the best co-payment has proven to be beneficial for many people.

Will there be a Medicare donut hole in 2022?

There will be a Medicare donut hole in 2022, once you and your insurance company have spent $4,430 on covered drugs you’re in the coverage gap.

How Do I Get Out of the Coverage Gap?

Once your total spending on covered drugs exceeds the threshold, you’ll enter the catastrophic coverage phase and no longer be subjected to the high costs of the coverage gap.

In 2022, to get out of the donut hole, the total cost of spending must reach $7,050 that’s when catastrophic coverage automatically starts.

How to Avoid the Medicare Donut Hole

Insurance policies change annually and the best policy for your neighbor isn’t always the best policy for you. Also, comparing your options will give you Peace of Mind.

When a licensed agent compares your meds to the formularies available, you know that based on the specific medications you take the policy recommendation is the most financially beneficial.

Plus, an agent comparing plans will give you an estimate of when you can expect to enter or exit the donut hole.

Licensed insurance agents can also help you find ways to save money by comparing the cost of your prescriptions at various pharmacies and insurance companies. This saves you time and money.

We’re ready when you are! Give us a call at the number above. Or, compare Part D plans in your area by completing our rate form.

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by Lindsay Malzone, Lindsay Malzone is the Medicare expert for Medigap.com. She's been contributing to many well-known publications as an industry expert since 2017. Her passion is educating Medicare beneficiaries on all their supplemental Medicare options so they can make an informed decision on their healthcare coverage.