What is the “Doughnut hole” in Part D Medicare coverage, and how does it work?

Most Part D drug plans have a coverage gap (also called the “donut hole”). There is a limit on what the drug plan will cover for your prescription drugs when you are in the donut hole.

The donut hole begins after you, and your drug plan have spent $4,130 in 2021 for covered drugs. This amount may change every year.

Once you reach the donut hole, you will pay 25% of the cost of brand-name prescription drugs. Even though you will only pay 25%, almost the full price of the drug will count as out-of-pocket costs to get you out of the donut hole. Your 15% and what the manufacturer pays (95% of the drug’s cost) will count.

You will pay 25% of the price for generic drugs, and your Part D plan will pay the remaining 75%. How the coverage for generic drugs is different than how it does for brand-name drugs. Only the 25% you pay for generic drugs will count toward getting you out of the donut hole.

Things that count towards getting you out of the donut hole:

  • Your yearly deductible, coinsurance, and copayments
  • The discount you get on brand-name drugs in the coverage gap
  • What you pay in the coverage gap

Things that don’t count towards getting you out of the donut hole:

  • The drug plan premium
  • Pharmacy dispensing fee

What you pay for drugs that aren’t covered

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