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Medicare Part D Coverage Gap

What is the "Donut Hole"?

A coverage gap for Medicare Part D plans, also known as the "donut hole", means there's a brief limit on what the drug plan will cover for prescription drugs. As a result, you may have to pay more out of pocket for your prescription drugs up until your reach the out of pocket threshold.

How does the Coverage Gap Work?

If you enroll in a Medicare Part D Plan (e.g. Humana Walmart Rx Plan in California), you are first required to pay for your prescription drugs until you meet your deductible (in this example $400). Once your annual deductible is met, your prescription drug plan covers its share until you reach your initial coverage limit. In 2017, this coverage limit is $3,700.

At this point, you are in the "donut hole" and you must pay a larger portion of the prescription drug's costs until a new calendar year begins or you reach the out-of-pocket threshold for Catastrophic Coverage (in 2017 the threshold is $4,950). Some Medicare drug plans offer coverage in the donut hole that reduces out-of-pocket costs. In some cases, this may be limited to covered generic drugs and in other cases it may apply to all drugs covered by the Medicare drug plan.

Receiving "Extra Help"

If you need assistance in paying for prescription drug costs, eligible Medicare beneficiaries can receive "Extra Help." This program helps individuals with limited income to pay for prescription drugs, and those eligible for "Extra Help" are not subject to the coverage gap.

The Affordable Care Act & Closing the Coverage Gap

The Affordable Care Act, also known as "Obamacare," makes prescription drug coverage more affordable while in the coverage gap. From now until 2020, you’ll pay less while in in the “donut hole” until it’s closed by 2020. In 2020, you’ll pay the same percentage (i.e. the copayment) you pay from the time you meet the deductible until you reach the out-of-pocket spending limit. The following table summarizes your out of pocket share for generic and brand name prescription drugs from now until 2020.

Your Out of Pocket Share While in the Coverage Gap
 Brand Name DrugsGeneric Drugs
201347.5%79%
201447.5%72%
201545%65%
201645%58%
201740%51%
201835%44%
201930%37%
202025%25%

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