Many of you have heard of the dreaded Donut Hole. Some unfortunate ones have even experienced it. A few of you might be thinking about a trip to Dunkin. But here is what it’s all about…
The Donut Hole is another term for the Medicare Prescription Drug Coverage Gap. The Center for Medicare and Medicaid Services (CMS), determines the figures for the Coverage Gap on an annual basis.
For 2021, consumers enrolled in a Medicare Prescription Drug Plan or a Medicare Advantage Prescription Drug Plan can expect to have a maximum annual deductible of $445. This means that consumers may have to pay up to $445 before receiving any benefits from their plan.
Once the deductible is met, consumers are in their Initial Coverage Stage. During this stage, consumers can expect to pay their copays for their prescription medications, while the insurance plan may pay the difference. Consumers will remain in this Initial Coverage Stage until their Total Drug Costs reach $4,130. The Total Drug Costs is calculated by adding what the consumer has paid toward their deductible plus what the consumer paid in copayments plus what the insurance company has paid towards the medications.
Once the consumer reaches the $4,130 threshold, they then move to into the Coverage Gap, also known as the Donut Hole. During this time the consumer will pay 25% of the cost of their medications until their Total Out-of-Pocket costs reach $6,550. The Total Out-of-Pocket costs are calculated differently, however. The consumer’s Total Out-of-Pocket is determined by adding what the consumer has paid towards their deductible plus what the consumer has paid in copays in the Initial Coverage Stage plus what the consumer has paid while in the Donut Hole.
After a consumer reaches the $6,550 in Total Out-of-Pocket costs, they move into the Catastrophic Coverage stage. At this point, consumers will pay 5% of the cost of their medications or $3.70 for generic medications and $9.20 for brand name medication, whichever is greater.
It is important to know that if a consumer is eligible for either Medicaid or Extra Help, they are not subjected to the Donut Hole.