Is there still a Medicare “donut hole” in 2021?

What is the Medicare “donut hole?”

This delicious-sounding term is simply a colloquialism that refers to what is officially known as the Medicare Part D coverage gap. The Medicare Part D coverage gap is the period when your total prescription drug costs reach their limit under Medicare Part D. The coverage gap earned the nickname “donut hole” because, at one point, it was once a kind of “hole” in the middle of drug coverage during the calendar year.

When congress first designed Medicare Part D, in an effort to give beneficiaries the ability to better afford their medication, it was intended to cover the vast majority of prescription drugs. In some cases, however, one may have medication costs that greatly exceed average spending.

To ease the financial burden on the government, the Medicare Part D donut hole was designed to shift additional financial responsibility onto the beneficiary, thereby encouraging people to seek less expensive generic drugs or prescription drug alternatives. Overall, this has helped to maintain lower premium and coinsurance costs for Medicare Part D coverage.

Is the Medicare donut hole ending in 2021?

In 2021, the Medicare donut hole has shrunk considerably, but contrary to what you may have heard recently, it has yet to end entirely. Since the Affordable Care Act (ACA) passed back in 2010, the donut hole has been slowly closing. 

In decades prior to the passing of the ACA, entering the donut hole meant that you would be responsible for paying 100 percent of the costs of your prescription drugs while in the gap. As of 2021, however, the percentage of prescription drug costs that you are responsible to pay as a Medicare Part D beneficiary is no more than 25 percent while in the donut hole.

When does one enter the donut hole?

In the year 2021, you will enter the Medicare donut hole when both you and your insurance plan have spent $4,130 on prescription drug costs. Prior to entering the donut hole coverage gap, all of your medications will usually be covered in full. Once you move into the donut hole gap however, you will be responsible for paying 25 percent of prescription drug costs out-of-pocket.

While in the gap, Medicare will continue to keep a record of you and your insurance plan’s total eligible spending. If these expenses exceed $6,550 for the year, then you will exit the donut hole and enter a stage known as catastrophic coverage.

Don’t worry, this stage is not as ominous as it sounds. It simply means that you will pay either five percent or a small copay (whichever is more) for your medications for the remainder of the year. Your insurance will typically cover the rest.

Keep in mind that some medications are not eligible for coverage under Medicare Part D, and thus are not counted toward the donut hole. This includes medications that are not covered by your plan.

In addition, the amount your drug plan pays toward the cost of a drug and your pharmacy’s dispensing fee do not usually count toward closing the gap. Neither does your insurance premium.

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A few additional questions about the Medicare donut hole.

The Medicare donut hole coverage gap can be a bit challenging to wrap your head around. In an effort to clear up any additional confusion, here are some common questions surrounding the 2021 Medicare Part D donut hole.

How will I know when I enter the donut hole?

Each month, your Part D plan will send you a statement, known as an explanation of benefits (EOB). The EOB will tell you exactly how much you have spent on covered medications and how much is left before you enter the donut hole coverage gap.

After you enter the gap, your insurance company will continue to send you notices that keep track of your spending. These notices will feature calculations regarding how much money is left to spend before you enter catastrophic coverage.

How can I avoid the donut hole?

Every Medicare Part D plan has a donut hole gap of some form. Therefore, the best way to avoid entering the gap is by carefully managing your medication spending threshold. This can be done by opting for generic medications whenever possible, or working alongside your doctor to reduce drug spending.

Are there any exemptions from the donut hole gap?

Certain individuals with low income or limited assets may qualify for a Medicare Part D low-income subsidy called Extra Help. If you qualify for Extra Help, Medicare will sometimes waive the coverage gap for you. In addition, your copays may decrease substantially under Extra Help.

You can apply for Extra Help at your local Social Security office, or online at the Social Security website.

Do Medicare Advantage plans cover the donut hole?

Under Medicare Advantage, the donut hole unfortunately functions the exact same way as it does under a standalone Medicare Part D plan. That said, some Medicare Advantage plans may offer coverage of certain medication even while you are in the donut hole. 

To learn more about your Medicare Advantage plan options, don’t hesitate to contact MedicareInsurance.com to speak with a live agent today! We can help you research and compare any plans in your area that may be of interest to you.