The Medicare Part D coverage gap, commonly known as the "Donut Hole," is one of the most confusing aspects of Medicare. Understanding how it works can help you budget for your prescription medications.
What is the Donut Hole?
The Donut Hole is a temporary limit on what your drug plan will cover for drugs. Not everyone will enter the coverage gap. You only enter it after you and your drug plan have spent a certain amount for covered drugs in a calendar year.
Good News
When you are in the coverage gap, your cost-sharing for covered brand-name and generic prescription drugs is limited. See Medicare.gov for current cost-sharing percentages.
What Happens When You Are in the Gap?
Historically, seniors had to pay 100% of their drug costs while in the gap. Today, thanks to healthcare reform, the gap has "closed." When you are in the coverage gap, your cost-sharing for covered brand-name and generic prescription drugs is limited. See Medicare.gov for current cost-sharing percentages and the annual out-of-pocket cap.
Catastrophic Coverage
Once your out-of-pocket spending reaches a specific annual limit, you exit the Donut Hole and enter Catastrophic Coverage. Recent legislative changes have made Catastrophic Coverage significantly more affordable, capping your annual out-of-pocket drug costs.
