Understanding the Medicare Donut Hole

If you are new to Medicare or planning to enroll soon, you’ll want to understand the Medicare Part D coverage gap. The Part D coverage gap is also known as the Medicare donut hole. This gap in prescription drug coverage affects the majority of Medicare members. It often increases the out-of-pocket expenses that beneficiaries pay for their medications.

Recent changes to the Medicare coverage gap are beginning to make prescription drug coverage more consistent and manageable. According to Heather Adams, government compliance pharmacist with Highmark, “As we begin 2024, closing the Medicare donut hole helps reduce costs in the coverage gap. Plans are starting to pay more, while members are paying less.” To understand how the Medicare donut hole may affect your coverage, read through the following answers to common questions:

What is the Medicare donut hole?

The Medicare donut hole is a temporary change in prescription drug coverage between the Medicare Part D initial coverage phase and the catastrophic coverage phase. During the initial coverage phase, you’ll pay your plan’s set copayment or coinsurance. If the total of what you and your drug plan pay for your medications reaches the coverage limit (for example: $5,030 in 2024), you’ll enter the coverage gap. Then, instead of paying your copayment or coinsurance, you’ll pay a set percentage of the total cost of your drug. Once your out-of-pocket spending reaches the predetermined threshold (For example: $8,000 in 2024), you’ll exit the coverage gap and enter the catastrophic coverage phase. Now you'll only pay a low copayment or coinsurance for prescription drugs.

What will 2024 bring for the Medicare Part D plans without the donut hole (coverage gap)?

2024 brings changes to spending limits and the amount you'll pay for generic medications. Medicare Part D plans without the donut hole for 2024 include:

• The initial coverage phase limit increases to $5,030, so it will take you longer to reach the coverage gap.
• The donut hole closes for generic drugs. This means that you'll now pay no more than 25% of the total price for generic medications.

Just as in earlier years, the amount you pay (25%) will count toward your total out-of-pocket costs. The total out-of-pocket threshold for the coverage gap is $8,000. Once you reach this amount, you are out of the donut hole and catastrophic coverage begins. Once a member is in catastrophic coverage, their medications are 95% covered and they'll only pay 5% for the rest of the year.

What steps can I take to avoid the Medicare donut hole?

The closing of the Medicare donut hole for generic drugs in 2024 will help drug coverage to be more manageable. It will lower the effects some members feel when switching from paying a copay/coinsurance to paying the percentages. But to keep prescription costs down and delay the coverage gap, Adams recommends taking these steps:

• Ask your physician or pharmacist if there is a generic drug available. Until the generic drug donut hole closes in 2024, check with your insurance to see whether the brand name or generic drug is more cost effective. Or see if there is a similar medication for the same medical condition available at a lower cost.
• Check to see which pharmacies your insurance covers. Prescriptions filled by a preferred vendor tend to cost less.