Twin City Underwriters

The Donut Hole or Coverage Gap: What You Need to Know

March 1, 2018 | Sara Rosas

The Donut Hole or Coverage Gap

What is it? Will it affect me? When will that happen and how long does it last?

You may have heard the phrase “Donut Hole” on the news. Unfortunately, this isn’t the sweet sugary treat. Most Medicare Drug plans (either stand alone or embedded with your health plan) will have a Donut Hole – a gap in coverage.

Medicare regulates and sets the dollar amounts you will spend before you enter the Donut Hole – and what your cost sharing will be once you reach the Donut Hole. Medicare also sets the limit of your out of pocket cost while in the coverage gap – before moving into Catastrophic coverage. These dollar amounts change each year, decreasing in size until 2020 when all drugs will be 25% while in the Donut Hole.

Not everyone will enter the coverage gap or donut hole.

There are 4 stages in a standard Medicare Part D plan:

Stage 1

  • DEDUCTIBLE – You pay 100%
    • The amount you pay out of your pocket before you plan begins to pay

Stage 2

  • INITIAL COVERAGE – You share the cost with your Insurance Part D plan
    • Copays (fixed flat amounts)
    • Coinsurance (percentage of the retail cost)

Stage 3

  • COVERAGE GAP – DONUT HOLE (not everyone enters this stage)
    • When the shared retail cost between you and the insurance company reaches $3,750 (2018) – you move into the Donut Hole also known as the Coverage Gap.
    • Cost for prescriptions change – In 2018 you now will pay a maximum of 35% for Brand name drugs – and 44% for Generic drugs. (this is based on the retail cost)
    • Cost sharing continues until YOUR out of pocket costs reach $5,000 limit. Once you reach $5,000 (2018) out of pocket – you move out of the Coverage Gap to the 4th and final stage – Catastrophic coverage.

Stage 4

  • CATASTROPHIC COVERAGE
    • When you have spent $5,000 (2018) out of your pocket – you move into Catastrophic coverage.
    • Your $5,000 out of pocket includes the following: Deductible, copayments and coinsurance, and what you pay while in the coverage gap. It does NOT include your plans premium, over the counter drugs or drugs that are not on your plans formulary. It also doesn’t cover drugs you get through a formulary exception.
    • Cost of your medications change to fixed copay amounts. In 2018 you will pay the following: $8.35 Brand name drugs and $3.35 for generic drugs.
    • You continue to pay this amount for the rest of the calendar year – then it starts all over again.

Not sure if your plan has a Donut Hole? Our team is here to help you – reach out to us today.