More commonly known as the “donut hole”, this is a period of time when there is a temporary “gap” in prescription drug coverage. If you are one of the many Medicare beneficiaries to reach this stage, you are simply responsible for a higher share of your Part D drug costs. Although your plan cannot change premiums or deductibles during the plan year, the amount you pay for your drugs can change. Ultimately, how much you pay for your medications is based on the drugs you are taking, in addition to the coverage period you are in. Below is an outline of the 4 stages of Part D prescription drug coverage.

Stages of Part D Prescription Drug Coverage

1. Deductible Stage

The amount you pay for medication costs BEFORE your plan begins to pay its share of your medication costs. The amount of the Part D deductible varies by plan, but Medicare sets a cap on deductibles every plan year. In 2024, the maximum annual drug deductible is set at $545. Some Part D plans have $0 deductibles, others go as high as $545 in 2024. If you are lucky to be on a plan with a $0 deductible, you skip this stage entirely.

2. Initial Coverage Stage

During this stage, you ultimately share Part D drug costs with your drug plan until you reach a certain threshold amount. Just like the deductible, this amount changes annually and is set by Medicare. In this period, you are generally responsible for copays and/or co-insurance amounts. In 2024, the shared total is $5,030. Once you and your plan spend $5,030 on covered medications, you move into the coverage gap stage of Medicare Part D.

3. Coverage Gap/Donut Hole

Once you and your plan have spent $5,030 in total drug costs in 2024, you are officially in the coverage gap and medication costs increase. During this stage, you pay a maximum of 25% of your plans cost for brand name drugs and 25% for generics. Ultimately, you stay in the coverage gap until your total out of pocket drug costs reach $8,000. Important to note, not everyone will enter the donut hole because their drug costs won’t be high enough. Likewise, those getting EXTRA HELP with Medicare Part D costs aren’t subject to the coverage gap.

CMS works with drug manufacturers & Part D plans giving discounts that help pay your drug costs during the coverage gap. In 2024, a 75% discount is given for both covered brand and generic drugs. This leaves you responsible for the remaining 25% of the cost.

4. Catastrophic Coverage Stage

In 2024, after you have met $8,000 in out-of-pocket costs for covered drugs, you leave the donut hole and reach catastrophic coverage. In this stage, your costs end for the remainder of the year for all formulary covered medications.

What counts towards moving you out of the donut hole?

Out-of-pocket costs that help you get out of the coverage gap include:

Deductibles, if any, in stage 1.

Co-pays and/or coinsurance amounts paid by you in the initial coverage stage.

What you paid during the coverage gap.

Manufacturer discounts on covered brand name medications.

Amounts paid by others for your medication costs, including charities and other family members.

Amounts paid by State Pharmaceutical Assistance Programs (SPAPs), AIDS Drug Assistance Programs, and the Indian Health Service.

Out-of-pocket costs that do not count towards the donut hole include:

Monthly plan premiums.

Costs for non-formulary medications, unless your plan approves a formulary exception.

Costs for covered medications received at an out-of-network pharmacy.

Manufacturer discounts received on generic medications.

Pharmacy dispensing fees.

Whether you made it to the coverage gap in the past, or think you may in the future, it’s a good idea to review your Part D drug coverage annually to make sure you are in the right prescription drug plan. Call us @ 813.280.9560 for help.