Why do my drug costs vary throughout the year?
Your drug costs under Part D can vary during the year for different reasons. One reason, which impacts about 7% of those with Medicare Part D, is the Coverage Gap, also called the donut hole. (See below for details.)
Fortunately, the donut hole is shrinking each year and will be gone by 2020 as part of the Affordable Care Act.
What is the donut hole?
Medicare Part D coverage has three phases*, the initial coverage phase, the coverage gap and the catastrophic coverage phase. During the initial coverage phase you pay approximately 25% of full cost for your drugs and the plan pays 75%.
*some plans also have a deductible which must be met before the plan starts paying anything towards drugs. After you reach the deductible, you will enter the initial coverage phase.
The “donut hole” or coverage gap in Part D occurs when the total cost of your covered drugs (what both you and the plan have paid, not including premiums) exceeds the “initial coverage limit.” The initial coverage limit for 2016 is $3310. It changes each year. When the total that you and your plan have paid during the year exceeds this amount you enter the donut hole. In this phase you will pay a higher copay for your prescription drugs and your plan will pay less. In 2016 you will pay 45% of the full price of brand drugs and 58% of generic drugs while in the donut hole.
Once your out-of-pocket costs for the year (i.e., the deductible and any copays you have paid) exceed $4850 you will be out of the donut hole and into the catastrophic coverage phase for the rest of the year. At this point you will pay 5% of the drug cost or $2.50 for generic or $7.40 for brand drugs, whichever is greater.
The donut hole does not apply to those who receive Extra Help for their prescription drugs. See here to learn more about Extra Help.
Help! I’m going to hit the donut hole — What can I do?
Click here to see more information about how to save money on prescription drugs whether or not you’re in the donut hole.
We recommend that you make an appointment to see a HICAP counselor for assistance. See the list of Contra Costa HICAP counseling sites.
More information about Medicare Prescription Drug coverage.