Explaining the Medicare Part D Coverage Gap

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Not All Donut Holes Are Tasty

The phrase “donut hole” in itself is enough to conjure visions of tasty pastry and sweet glaze. Believe it or not, a donut hole isn’t always a good thing. It can be especially harsh when you’re speaking of donut holes in terms of a Medicare Part D plan.

A Medicare donut hole refers not to a welcome package of glazed sweets sent by CMS after you become an enrollee in a Medicare Part D plan. That, unfortunately, is not a thing. However, the Medicare Part D coverage gap is real, and that’s what a Medicare donut hole is referring to.

Many of you have probably heard of the “Medicare donut hole”, but you may not have known what it was. Now that you do, you’re probably wishing you hadn’t! We’re here to tell you that it’s okay. It’s not that you shouldn’t worry about the infamous donut hole in your Part D drug plan coverage, but…

Scared you, didn’t I?

Hey, you really shouldn’t worry about it. We’re here to explain the Part D coverage gap in detail. We’re also here to talk about ways that Medicare beneficiaries can avoid falling into the Medicare donut hole.

Tell Me More About the Medicare Donut Hole

So, if you’ve never heard of the Medicare donut hole, there are probably a few reasons why you haven’t:

• You’re a recent enrollee and still in the first steps of your Medicare plan-finding journey
• You’ve never had a Medicare Part D Prescription Drug coverage plan
• You’ve never had a reason to worry about the Medicare donut hole

The Medicare donut hole is actually a gap in your prescription drug coverage through a Medicare Part D plan. This coverage gap happens once you’ve reached a limit beyond your Initial Coverage Period threshold. The Initial Coverage Period threshold for 2023 is $4,660. Once you’ve reached this limit, Medicare beneficiaries become responsible for paying 25 percent of the cost of your medications Out-of-Pocket.

The Out-of-Pocket amount you pay once you’ve fallen into the gap for prescription medication coverage has drastically decreased since 2020. Prior to 2020, you may have been responsible for up to 100 percent of drug cost after you had exceeded the Initial Coverage Period limit.

I’ve Heard of the Medicare Donut Holes, But I Thought They Closed?

In some ways, the Medicare donut hole did close. Prior to the Affordable Care Act (ACA) being signed into law, you’d have been responsible for meeting all costs Out-of-Pocket (OOP) for prescription medications (both brand-name and generic drugs) once going over your Initial Coverage limit. You’d have been paying those costs until your prescription drug  cost reached what is known as the Catastrophic Coverage Limit.

As of 2023, the Catastrophic Coverage Limit has been set at $7,400. That’s a lot of money. Paying 100 percent OOP for medications until you reach $7,400 could be devastating to low-income seniors. 25 percent is still hard on the pocket, but it’s easier to bear than the full cost of some meds.

Once you reach the Catastrophic Coverage Limit, you’ll still pay costs Out-of-Pocket, but they’re significantly less than what you pay while you’re stuck in the Part D drug coverage gap, in most cases. After you enter Catastrophic Coverage, you’re only responsible for copays or coinsurance, and those take a significant cut.

So, the drug  coverage gap still exists. Some sources may say otherwise, but the Part D coverage gap never went away. It filled in somewhat, but it’s still kind of deep.

Is There Any Way to Get Out of the Donut Hole Without Having to Spend Up to the Catastrophic Coverage Limit?

Is There Any Way to Get Out of the Donut Hole Without Having to Spend Up to the Catastrophic Coverage Limit?

Unfortunately, once you’re in the Medicare donut hole, you’re there until you reach the Catastrophic Coverage Limit. Fortunately, it isn’t that hard to reach Catastrophic Coverage. There are a number of costs that go into the figure that help you get there, including:

• Your Part D Prescription Drug coverage deductible
• Costs you paid during the Initial Coverage Period
• Nearly 100 percent of full cost of brand-name drugs purchased while in the Part D coverage gap
• Amounts paid by other sources, such as family members or charities
• Amounts paid by State Pharmaceutical Assistance Programs (SPAPs), drug assistance programs that help with AIDS patients, and the Indian Health Service

The only way to get out of the Medicare donut hole is to avoid it altogether. Believe it or not, doing so is easier than you think.

How Do I Avoid Falling Into the Medicare Donut Hole?

There are two ways to avoid this coverage gap.

The easiest way is to keep track of your medication costs so that you can manage your spending threshold. One of the best ways to manage your threshold is to opt for generics whenever possible. The other is to work with your physician to figure out how to reduce the amount you spend on prescription medications in total (both generic drugs and brand-name).

Another way to avoid the gap is tougher to follow. You can become exempt from the Part D coverage gap altogether by qualifying for a Medicare subsidy known as Extra Help. However, whether or not you can receive the Extra Help subsidy depends on your income level. Only seniors with limited income and/or limited assets qualify for Extra Help.

Curious about how you can avoid the Medicare coverage gap? Wondering whether or not you may qualify for Extra Help? Our licensed agents can help answer any question you have regarding Medicare plans near you. Give us a call today!