Part D Coverage Gap (Donut Hole)

The Part D Coverage Gap, also known as the Donut Hole, is a temporary limit on prescription drug coverage under Medicare Part D. It is a phase of the Part D benefit that starts after you and your plan have spent a certain amount on covered prescription drugs.

Here are the key features of the Part D Coverage Gap:

• Spending limit: In 2021, the coverage gap begins after you and your plan have spent a total of $4,130 on covered prescription drugs.

• Higher out-of-pocket costs: Once you enter the coverage gap, you are responsible for paying a higher portion of the cost of your covered prescription drugs. In 2021, you will pay 25% of the cost for both brand-name and generic drugs while in the gap.

• Temporary coverage: While you are in the coverage gap, you will receive a discount on the cost of your covered brand-name and generic drugs. In 2021, you will pay no more than 25% of the cost of brand-name drugs and 75% of the cost of generic drugs.

• Catastrophic coverage: Once you have paid a certain amount out-of-pocket for covered prescription drugs while in the coverage gap, you will exit the gap and enter the catastrophic coverage phase. During this phase, you will pay a lower amount for your prescription drugs for the remainder of the year.

Example:

Let's say your Medicare Part D plan has a $400 deductible and a standard initial coverage limit of $4,130 in 2021. Once you and your plan have spent a total of $4,130 on covered prescription drugs, you enter the coverage gap.

While in the coverage gap, you need a brand-name medication that costs $200. You will pay 25% of the cost of the drug, or $50, and the drug manufacturer will provide a 70% discount on the remaining cost of the drug. You will pay $60 for the drug, and the remaining $140 will be covered by the manufacturer.

Once you have paid $6,550 out-of-pocket for covered prescription drugs in 2021, you will exit the coverage gap and enter the catastrophic coverage phase. During this phase, you will pay a smaller amount for your prescription drugs for the remainder of the year.

It is important to note that not all Medicare Part D plans have a coverage gap, and the costs and discounts associated with the coverage gap may vary between plans. It is important to review your plan's details and costs to understand how the coverage gap may affect your prescription drug expenses.