Although it may sound sweet, the "donut hole" in Medicare’s prescription drug coverage can feel like a trap to those who fall into it. If you or a family member is covered by Medicare, and has prescription drug coverage, you should familiarize yourself with the coverage gap. In general, 20 to 30 percent of Medicare members end up in the so-called "donut hole."
Visualize a donut: You have a left side, a hole in the middle and a right side.
Left side: You stay on the left side of the donut until your payments and your plan’s payments reach $3,820* on covered prescription medications. This is not only what you pay personally at the pharmacy; this is the total of your drug costs plus your deductible and copays.
Hole in the middle: Once you reach $3,820 in drug costs this year, the "donut hole" phase of your Medicare plan begins. You remain in the hole until your True Out-of-Pocket (TrOOP) costs reach $5,100*. TrOOP includes the drug costs paid by you plus the 70 percent discount on brand-name drugs provided by the drug manufacturer.
Right side: Once you leave the gap, by meeting the TrOOP threshold, catastrophic coverage kicks in and you only pay a small coinsurance amount or copayment for covered drugs for the remainder of the calendar year.
In 2020, the coverage gap will close and the "donut hole" will disappear.
Staying out of the 'donut hole'
No one wants to spend unnecessary money on prescription drugs. To try to keep yourself out of the "donut hole," consider these tips:
- Switch to lower-cost drugs. Talk to your doctor about using generic or over-the-counter drugs.
- Take advantage of mail-order prescription drug programs. Check to see if using a mail-order pharmacy for a three-month supply of maintenance drugs may lower your copayments.
- Shop around and compare prices via retail and online stores.
Always pay attention to your monthly health insurance statements to know how close you are to entering or exiting the "donut hole." You will keep yourself financially prepared to incur these costs.
*These are the costs for 2019.
This story was updated in January 2019.