The Donut Hole is another term for the Medicare Part D coverage gap. This gap has caused a lot of confusion for people across the nation. Before the Affordable Care Act (ACA, or Obamacare) went into effect, senior citizens who fell into this gap were forced to spend more money (sometimes full price) on their prescription medications. The donut hole has caused a lot of problems for seniors enrolled in the Medicare program for prescription drugs. This is why it was addressed in Obamacare.
The Affordable Care Act, was established in 2010, sought to narrow this coverage gap to ease the financial impact of medical expenses on seniors. Medicare Part D first began in 2006. From then until 2010, anyone who fell into the donut hole coverage gap were required to pay 100 percent of their prescription drug costs. But after the health care reform law, this no longer happens. Now, individuals will have to pay considerably less for prescriptions drugs when they reach the coverage gap.
This is what happens now if you end up in the “donut hole”:
- After your total drug costs exceed $3,310 (for 2016 and $3,700 for 2017) for the year, you enter the gap. This includes benefits received from your plan and any out-of-pocket expenses you pay to obtain prescriptions.
- Once you are in the coverage gap, you will have to pay 45 percent of the price for brand name prescriptions medications and 58 percent for generic brands (for 2016). In 2017, you’ll only have to pay 40 percent for brand name drugs and 51 percent for generic drugs. Half of the cost for the brand name drugs will be paid for by the federal government and the other half by the manufacturer. The costs will continue to reduce each year until 2020, when it’s 25 percent for all drugs purchased during the donut hole.
- You stay inside of the donut hole until your out-of-pocket costs for the year (i.e. copays and deductibles) reaches a specific amount. In 2015, it was $4,700 and in 2016, it’s $4,850. The contribution made towards brand name medications counts towards your limit, even though it’s not coming out of your pocket. The amount the government pays doesn’t count.
- Once this limit is reached, catastrophic drug coverage automatically begins, which means the plan will cover 95 percent of the remaining expenses until the year’s end.
- Each calendar year, the cycle is repeated – deductible, initial period of coverage, donut hole and catastrophic coverage.
Is the Donut Hole Inevitable?
Not everyone will fall into the coverage gap. There are ways it can be avoided, such as when:
- You keep the cost of your medications below the limit for the year ($3,310 for 2016 and $3,700 for 2017).
- You have been qualified for Extra Help, which eliminates the gap.
- You have purchased additional coverage through your employer or have union benefits that cover some or all of your donut hole gap.
- You obtain additional coverage from a state pharmacy assistance program that offers help during the gap.
- You enroll in a Medicare drug plan that provides coverage for drugs (normally generic brands only), whenever you’re in the donut hole. These policies typically have a high premium.
How to Get Medications During the Coverage Gap
You can continue buying your prescriptions at the same price that was negotiated by your plan, which is typically less than the retail price. The plan you have will keep track of medication expenses and will count expenses towards the limit for out-of-pocket costs.
You can also look in other places to find medications at cheaper prices. However, keep in mind that Medicare only counts expenses that are spent at pharmacies that are within your plan’s network. So weigh your options – is it better to buy cheaper drugs from out-of-network pharmacies and save money now, or spend more on drugs from your in-network pharmacies to reach your limit and begin your catastrophic drug coverage.
What Out-of-Pocket Costs Count Towards Your Limit?
It’s good to know which out-of-pocket expenses count towards your limit so you can manage your money better. This is important if you are looking to jumpstart your catastrophic drug coverage as soon as possible after entering the donut hole. Qualifying out-of-pocket costs includes:
- Copays paid during the initial coverage period
Out-of-Pocket expenses you pay for medications during the gap
- Fifty percent of the expenses paid for brand name medications by the manufacturer while in the donut hole
- Any money spent on your medications by a friend or family member, charitable group or state pharmacy assistance program
- Make sure to purchase medications that are covered in your plan’s formulary and from pharmacies that are within your network or it won’t count towards the limit.
What Doesn’t Count Towards Your Out-of-Pocket Limit
The following expenses do not count towards your out-of-pocket expenses limit:
- The premium on your plan
- Drugs paid for that aren’t covered by your plan
- Expenses that are paid for by your plan, employer, union, federal agency or other group insurance provider
- Discounts received on generic and brand name drugs while in the gap that aren’t given to you by the federal government
- Expenses paid for medications that are free or low-cost due to a drug manufacturer’s assistance program
- Prescription drugs purchased from Canada or other countries
- Medication samples that are given to you for free by a doctor
The good news is that the discounts you do receive while you’re in the donut hole won’t deter you from obtaining catastrophic coverage. This is because majority of full cost brand name drugs that are purchased while you’re in the donut hole count towards the out-of-pocket limit, which jump-starts catastrophic coverage.
How to Delay Reaching the Donut Hole
If you want to prevent getting in the donut hole in the first place, you can talk to your doctor about generic drug options or brand names that are less expensive that you can buy to allow your initial coverage to last longer. Buying these prescriptions will help to minimize your copays. You can also ask if there are other drug options on your plan’s formulary, such as generics or older brand name medications that are cheaper. If you don’t have additional coverage from another insurance provider, there are other ways you can obtain help, such as through:
- Pharmaceutical manufacturer low-cost drug assistance programs
- Lower-cost medications from Canada and other foreign countries
- Free or low-cost medications provided through local medical clinics, patients’ organizations or charities.