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Medicare Part D Coverage Gap (aka “Donut Hole”)

Lovely senior woman holds two glazed donuts keeps lips folded looks pleasantly at camera dressed in fashionable outfit with necklace and bracelet isolated over pink wall. Stylish granny with dessert

All Medicare drug coverage has a coverage gap (also known as the “Donut Hole”).  This is when your drug plan will temporarily lower what it will pay once you drug costs reach a certain limit. 

Not everyone will enter the coverage gap. The coverage gap begins after you and your drug plan have spent a certain amount for covered drugs. In 2021, once you and your plan have spent $4,130 on covered drugs, you’re in the coverage gap. This amount may change each year. Also, people with Medicare who get Extra Help paying Part D costs won’t enter the coverage gap.

For those who don’t get Extra Help, you will need to know the rules for the “Donut Hole” in case you find yourself in it at some point:

  1. If your plan has a deductible, then you will be responsible for satisfying that deductible first and foremost. 
  2. Once the deductible is reached, or if you don’t have one, then you will pay the copays as decided by your plan for covered medications. 
  3. Once the total retail cost for your medications (what you pay + what the plan pays) reaches $4,130, then you will have entered the “Donut Hole”. When in the “Donut Hole” you will pay 25% for all medications.
  4. In order to exit the “Donut Hole”, an amount of $6,550 in total out-of-pocket drug costs will need to be spent and then you will enter the Catastrophic Phase. At this point, you will pay the greater amount of a small copay (under $10) OR a 5% co-insurance.
medicare donut hole

Important Note Regarding The Donut Hole!

Many of you won’t ever reach the “Donut Hole.” Most likely, the medications prescribed to you will be considered generic, which will keep costs low. Statistically, you probably won’t enter the donut hole. According to a study, only around 12% of all Medicare patients enter the “Donut Hole” each year, and only around 3% will enter the Catastrophic Phase. Consider the following if you’re evaluating the likelihood that you are a part of the 12%: the average tier 3 drug can easily cost around $300 per month retail. This means that in one year you will have accumulated $3,600 in total retail drug costs from this prescription alone, and now would only be a couple hundred dollars away from the $4,130 Initial Coverage Limit.

If you have a chronic condition, such as diabetes, you will be more likely to enter the “Donut Hole” as approximately 37% of all diabetics on Medicare enter the coverage gap. This is because if you are on insulin, you will most likely have prescriptions within tier 3 or another specialty tier.

Some Medicare Advantage and Prescription Drug Plans offer coverage for certain medications through the “Donut Hole,” however if coverage is offered it’s often only for generics. Some C-SNP Medicare Advantage plans will offer coverage for select medications through the “Donut Hole” as well. For example, in many counties there is a health plan that offers coverage to lower or eliminate your copay for insulin when in the “Donut Hole.” This could be a life saver for those who depend on their insulin, and could potentially keep you out of the hospital. For this reason, it’s recommended to explore your options. We can help you do the research and ensure you are covered for what you need most.

Part D Senior Savings Model For The Donut Hole

Woman with adult onset diabetes measuring blood sugar with indicator

In response to the large number of diabetics in the donut hole, Medicare created the Part D Senior Savings Model this year in 2021. This is a program that any Medicare Part D plan can allow seniors to charge a maximum of only $35 for covered insulins and avoid the coverage gap for these covered Medications. 

Example: Say you take Novolog and it is a covered Medication on your Medicare Part D plan. If the plan participates in the Senior Savings Model then you would only pay a maximum of a $35 copay. Additionally, you would pay that same copay all year and never have to deal with the “Donut Hole” for this medication.  

Now, this does not mean that all plans Part D plans will participate in this model. Each Medicare Part D plan has the choice to participate.  So when you are shopping around be sure to ask your broker about plans that do participate, if you take insulin. 

Worried about the coverage gap? Meet with one of our Local Medicare Agents to learn more about your options where you live. Get help with a licensed professional to learn more about Medicare’s Donut Hole. 

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