Medicare Part D provides prescription drug coverage for millions of Medicare beneficiaries. You can get Part D coverage as a standalone policy with your Original Medicare or through a Medicare Advantage plan. Either way, there’s one aspect of Medicare Part D that many people don’t understand: the Donut Hole. So, what is the Donut Hole? More importantly, how will the Donut Hole affect your prescription drug coverage in 2020, 2021, and beyond?
When you get Medicare Prescription Drug Coverage, your coverage goes through several different stages each year. The first stage is the deductible. As with any insurance, you will have to pay 100% of your prescription drug costs until the deductible has been met. As of 2020, the standard Part D deductible is $435 (this amount will likely go up in 2021).
After you have paid your deductible, your Part D coverage moves to the second stage. This is the Initial Coverage Limit (ICL). During this period, you will only pay 25% of your prescription drug costs. In 2020, this stage lasts until your total drug costs reach $4,020. Again, this amount will likely go up in 2021.
Historically, once you reached the end of the ICL stage, your coverage moved into the Donut Hole. The Donut Hole is also commonly known as a “coverage gap.” During this stage, you would have to pay 25% for name-brand prescription drugs and 37% for generic prescription drugs. This period lasts until your total out-of-pocket expenses for prescription drugs reaches $6,350.
Once the Donut Hole ends, you enter Catastrophic Coverage. During this stage, you’ll generally pay 5% of your prescription drug costs. If 5% is less than $3.60 for generic drugs or $8.95 for name-brand drugs, then you will pay the greater amount.
As of January 21st, 2020, the Donut Hole has closed. However, this doesn’t mean that your drugs will be free. Instead, the ICL stage will merely be extended. In other words, instead of the payment structure of the Donut Hole, you will pay 25% for all of your prescription drugs this year. This payment structure will likely stay in place for 2021 unless Medicare Part D experiences any major changes in the coming months.
In the past, the Donut Hole forced many Medicare beneficiaries to pay more for generic prescription drugs. As of 2020, the Donut Hole has been closed. As a result, older adults will only need to pay 25% of the cost for all of their prescription drugs under Medicare Part D.
Fortunately, you won’t have to worry about the Donut Hole in 2020. Nonetheless, if you are unsure about how the Donut Hole affects your prescription drug coverage or if you have more questions about Medicare, feel free to fill out this form or give us a call to speak with our licensed insurance brokers today.