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Summary

The "doughnut hole" (donut hole) is the common name for a coverage gap in Medicare prescription drug coverage. The gap starts when you and Medicare spend a base amount during a calendar year, and ends when expenditures reach a catastrophic limit during the same year.  In 2018, the "doughnut hole" refers to true out-of-pocket (TROOP) drug expenditures by you and Medicare between a base amount of  $5,000.

NOTE:

  • People with Medicare who get Extra Help offsite link paying Part D costs won’t enter the coverage gap.
  • The Doughnut Hole is phased out as of 2019.

Before you reach the doughnut hole:Only certain costs are counted before entering the doughnut hole. These are different from costs which count while you are in the doughnut hole.

In the doughnut hole: 

  • Brand Name Drugs
    • Once you reach the coverage gap in 2018, you wll pay 35 per cent of the plan's cost for covered brand-name prescription drugs. It doesn't matter if you buy your medicine at a pharmacy or order through the mail. 
    • The discount will come off of the price that your plan has set with the pharmacy for that specific drug. 
    • Although you will only pay 35% of the price, 85 per cent of the price will count as out-of-pocket costs offsite link which will help you get out of the coverage gap. 
  • Generic Drugs
    • In 2018, you will have to pay 44 percent of the price for generic drugs during the coverage gap. What you pay for generic drugs during the coverage gap will decrease each year until it reaches 25% in 2019. The coverage for generic drugs works differently from the discount for brand-name drugs. For generic drugs, only the amount you pay will count toward getting you out of the coverage gap.
  • There is no discount for drugs in the doughnut hole if:
    • The drug is not on the plan's formulary.
    • The drug manufacturer declines to participate in the discount program. (In fact, these drugs are not covered even in the initial and castrophic periods, or in the Extra Help program, either).  According to AARP, manufacturers of 99% of brand-name drugs used by Medicare beneficiaries have agreed to provide the discounts.
  • You continue to pay the premium for your plan. 
  • Items that do and do not count toward the coverage gap:
    • Items that do count toward the coverage gap:
    • Items that do not count toward the coverage gap:
      • The drugh plan premium
      • Pharmacy dispensing fee
      • What you pay for drugs that are not covered
  • The premium does not count toward getting you out of the hole.

Many drug plans include both preferred and non-preferred pharmacies in their pharmacy networks. You may pay less for your drugs at preferred pharmacies. 

If you think you reached the coverage gap and you do not get a discount when you pay for your brand-name prescription, review your next "Explanation of Benefits" (EOB) offsite link. If the discount doesn't appear on the EOB, contact your drug plan to make sure that your prescription records are correct and up-to-date. Get your plan's contact information from a Personalized Search (under General Search) offsite link, or search by plan name offsite link. If your drug plan does not agree that you are owed a discount, you can file an appeal offsite link

Accounting: Your Medicare drug plan should keep track of how much money you have spent out-of-pocket on your covered prescription drugs and which coverage period you are in. This information should be printed on your monthly statements. To make sure this information is correct, it is advisable to keep your receipts from the pharmacy until you compare the amounts to the amounts in the statement.

NOTE: If you are a recipient of Extra Help, there is no Doughnut hole. 

For additional information, see:

For individual questions about Medicare, consider contacting:

The Amount Of The Discount In The Doughnut Hole

Because of the Affordable Care Act, the financial impact of buying drugs while in the doughnut hole is reduced each year.

The amount of the discount depends on whether the drugs are brand name, generic or relate to insulin administration. For brand name and generic drugs to be counted, the drug must be on the plan's Formulary or the plan must agree to pay for the drug.

  • For brand name drugs:  
    • During 2016 there is a 55% discount on brand name drugs when you are in the doughnut hole. 
    • This discount does not affect the amount of time it takes to get out of the doughnut hole because the pre-discount price is what counts for this purpose. 
    • There is no discount on dispensing fees which some pharmacies charge when dispensing drugs.
  • For generic drugs and for drugs which are compounded at the pharmacy: 
    • During 2016, there is a 58% discount for generic drugs and the cost of dispensing fees which some pharmacies charge when dispensing drugs.  
    • This discount does not affect the amount of time it takes to get out of the doughnut hole because the pre-discount price is what counts for this purpose. 

The amount of time  If only part of a claim is in the doughnut hole, the discount is only applied to that part of the claim.

You do not have to do anything to obtain the discounts. The discounts are applied automatically by your druggist at the time you purchase covered medications.

The discounts will get larger until 2020 when the doughnut hole will be phased out. At that point, cost sharing for both brand and generic prescription drugs will be the same during the “donut hole” as during the initial coverage period. Consequently, in 2020, individuals will pay 25 percent of drug costs, and the Part D plan will pay 75 percent.

Expenses Which Count BEFORE Reaching The Doughnut Hole

The only expenses which count toward the start of the doughnut hole are monies you spend on drugs that are on the plan's formulary. 

Costs which count include:

  • The annual deductible.
  • All the co-pays and co insurance you pay during the current year.
  • Plans generally require that the drugs be purchased through a pharmacy with which the plan has a relationship.

The following costs do not count toward reaching catastrophic limits:

  • The drug plan premium
  • Costs for drugs not on a plan's formulary 
  • Pharmacy dispensing fees
  • (Generally), drugs not purchased through one of the plan's pharmacies
  • The cost of drugs which are not covered by Part D coverage.

Expenses Which Do And Do Not Count While You Are In The Doughnut Hole

While you are in the doughnut hole, the following costs do count toward your catastrophic limit:

  • The costs of all the drugs you purchase which are on the plan's Formulary
  • Any costs for drugs on the plan's formulary which are paid for you by a third party such as a friend, family member, charity, or state pharmacy assistance program.

The following costs do not count toward your catastrophic limit:






Payments You Make At The Other End Of The Doughnut Hole (Catastrophic Coverage)

In 2016, once an individual reaches the catastrophic portion of the benefit, Medicare Part D covers 95 percent of the drug expenses incurred. You pay 5 percent.

Plesae keep in mind: January 1 the process starts over again.


Who Gets The Discounts While In The Doughnut Hole?

Basically the discount applies to anyone who falls into the doughnut hole who:

  • Has a so-called "stand-alone" Part  D drug Plan.  This is the type of coverage that most people have who have original Medicare or
  • Has coverage under a Medicare Advantage health plan that provides drug coverage, or
  • Has Part D coverage in a plan sponsored by a current or former employer or union.

The discounts do not apply to people with limited incomes who receive low-cost prescription drug coverage under the Extra Help program. People who receive drug coverage under the Extra Help Program are not subjected to the doughnut hole.

How The Discount Does NOT Affect The Amount Of Time To Get Out Of The Doughnut Hole

Discounts do not count when determining the amount you spent to get out of the doughnut hole.  This is so even though you do not actually have to pay the amount of the discount.

For example:

  • The price of a drug you buy is $205: $200, plus a $5.00 dispensing fee.
  • If the discount were 50% (to make it easy), you would only pay $100 plus $5.00 dispensing fee. The total you pay would be $105.
  • However, the entire $205 is counted while you are in the doughnut hole as if you paid that much instead of the lower discounted price.

An Example Of How The Doughnut Hole Works

Medicare.gov provides the following examples for 2015

Brand name prescription drugs:

Mrs. Anderson reaches the coverage gap in her Medicare drug plan. She goes to her pharmacy to fill a prescription for a covered brand-name drug. The price for the drug is $60, and there's a $2 dispensing fee that gets added to the cost. Mrs. Anderson will pay 45% of the plan's cost for the drug ($60 x .45 = $27) plus 45% of the cost of the dispensing fee ($2 x .45 = $0.90), or a total of $27.90, for her prescription. $57.90 will be counted as out-of-pocket spending and will help Mrs. Anderson get out of the coverage gap because both the amount that Mrs. Anderson pays ($27.90) plus the manufacturer discount payment ($30.00) count as out-of-pocket spending. The remaining $4.10, which is 5% of the drug cost and 55% of the dispensing fee paid by the drug plan, isn't counted toward Mrs. Anderson's out-of-pocket spending.

Generic drugs:

Mr. Evans reaches the coverage gap in his Medicare drug plan. He goes to his pharmacy to fill a prescription for a covered generic drug. The price for the drug is $20, and there's a $2 dispensing fee that gets added to the cost. Mr. Evans will pay 65% of the plan’s cost for the drug and dispensing fee ($22 x .65 = $14.30). The $14.30 amount he pays will be counted as out-of-pocket spending to help him get out of the coverage gap.