Reducing the Donut Hole

You may never have heard of the “Donut Hole”. It has to do the Medicare Part D prescription drug plans. The donut hole is an unusual coverage gap that is triggered after you have paid $3,750 of drug costs in a year. After reaching the donut hole, you would suddenly be paying for a significant portion of your drug expenses out-of-pocket.

Last year, patients who exceeded the $3,750 threshold would have to pay 35% of the cost of brand-name drugs and 44% of generic drugs until their out-of-pocket spending reached $5,000. After that, they would pay no more than 5% of their drug costs for the rest of the year. Not surprisingly, many people do not know about the donut hole until they have a significant medical condition.

The good news is that the 2018 budget deal reduces the impact of the donut hole this year. Congress is requiring certain pharmaceutical manufacturers to pay more of the costs for Part D enrollees who are in the coverage gap – from 50% up to 70%.

The result? Once you reach Medicare Part D’s initial coverage limit ($3,820 in 2019), you will now receive a 75% discount on the total cost of the brand name drugs purchased while in the donut hole, until you spend a total of $5,100 out of pocket. After that, you would pay 5% of your drug costs for the remainder of the year.

While no none likes the donut hole, this change helps reduce the impact for patients requiring expensive drug treatments.