What is the Medicare ‘donut hole’?

Donuts are great—they’re delicious and tasty treats. The donut hole, or Medicare prescription drug coverage gap—which many people with Medicare find themselves falling into—is not great. What exactly is the Medicare donut hole? First, you need to understand Medicare and how it relates to prescription drugs.

You may be eligible for Medicare if you:

• are 65 years old,
• received Social Security Disability (SSD) benefits for two years,
• have End State Renal Disease (ESRD) and meet certain criteria, or
• have Lou Gehrig’s Disease (ALS)

Medicare is a health insurance program funded by the Social Security Administration through Medicare taxes you pay on your income, Medicare premiums, and the federal government. Essentially, that means the government will administer payment of many of your healthcare and prescription drug costs.

Note: Medicare is different from Medicaid, which is another government-provided health insurance program for low-income Americans, regardless of their age.

The problem many people with Medicare face is the Part D donut hole. The donut hole forms when your total annual drug costs (what you and your plan have paid) reach a certain limit. This donut hole could mean hefty price tags at the pharmacy counter for people covered through Medicare Part D plans.

What does it mean to be in the Medicare donut hole?

The federal government sets coverage phases for how your drugs will be paid for throughout the year.

In a nutshell, you enter the donut hole when the total cost of your prescription drugs reaches a predetermined combined cost. At this point, your Part D plan stops paying for your prescriptions.

The total cost at which the donut hole begins is adjusted each year. You must pay a percentage of medication costs while you’re in the Medicare donut hole.

The donut hole won’t affect all Medicare beneficiaries. Those at risk of falling into the donut hole are Medicare members with a prescription drug plan, sometimes referred to as a PDP or MAPD.

Medicare donut hole example

Let’s say you just signed up for Medicare Part D coverage. First, you pay 100% of all drug expenses until you meet your deductible, which could be as high as $435. Once you’ve passed this initial coverage limit, you’ll enter the initial coverage period. You’re then responsible for paying coinsurance or a copayment on the total cost of your prescriptions. Your Part D prescription drug plan will cover the rest.

When your out-of-pocket costs and the costs incurred by your plan reach a combined total of $4,020, you enter the dreaded Medicare Part D donut hole. You will now be responsible for 25% of costs for prescription drugs until you hit your yearly out-of-pocket spending limit of $6,350. Once you hit that limit, you’ll be in “catastrophic coverage.” You’ll pay either 5% of the cost of your medication or $3.60 for generics and $8.95 for brand name drugs, whichever number is greater.

So to put it simply, the left side of the donut is the sweet part where you pay your deductible, and coinsurance or a copayment. The donut hole is where you usually pay a higher percentage of your total drug costs. The right side of the donut is when you can enjoy lower drug costs again.

It’s easy to see how the donut hole can quickly throw many Medicare subscribers into financial turmoil. No person with Medicare should have to make a choice between food, rent, and prescription drugs.

RELATED: 10 reasons why patients don’t always follow doctors’ orders

What is the Medicare donut hole for 2020?

Although the Medicare donut hole is a stress-inducing scenario for many Americans who require expensive prescription drugs, there is some good news for 2020. Over the years, the Part D coverage gap has closed thanks to the Affordable Care Act (ACA). Compared to 2019, the donut hole has shrunk further.

What does this mean for you? Let’s take a closer look:

• The donut hole starts at $4,020 in total drug costs, adding an extra $200 onto 2019’s $3,820 initial coverage limit.
• When in the donut hole, you’ll pay 25% for both brand-name and generic drugs. This is an improvement from 2019 when the donut hole meant you’d pay 25% for brand-name drugs and 37% for generic drugs.

In short, 2020 allows for more Medicare-paid coverage before you fall into the donut hole, and reduces the amount you pay for medication once you’re in the donut hole.

Search medicare.gov if you need specific information on the medications that are covered by your Medicare program.

How to avoid the Medicare donut hole

There are a number of ways for Medicare Part D members to avoid falling into the donut hole. One option is to apply for the Medicare Part D Extra Help program, designed to aid those who meet specific income and asset criteria. If qualified, you wouldn’t pay monthly premiums or deductibles, up to a certain benchmark amount. You would be responsible for only a small fraction of each drug. Go to www.SSA.gov to learn more about the other potential benefits of applying for Extra Help.

While Extra Help, a low-income subsidy, is helpful for many—not everyone qualifies. There are a couple of other options, including State Pharmaceutical Assistance Programs, Patient Assistance Programs through various drug companies, and free pharmacy discount cards, such as SingleCare. These programs are essential for many Medicare recipients. If costs are a concern for access to medication, patient assistance programs and lower drug costs can help ensure people with Medicare adhere to their medication regimen and maintain their health while they wait to become eligible for “catastrophic coverage.”

RELATED: Can I use SingleCare if I’m on Medicare?

SingleCare provides members up to 80% off prescription medications. You can’t use SingleCare in conjunction with any Medicare plan. However, you can use SingleCare instead of Medicare in situations where SingleCare offers a better price on your prescriptions. It’s easy to search for your drug before going to the pharmacy to see what the savings would be. Then, when you pay for drugs during the donut hole, you are saving on out-of-pocket costs.

Prescriptions purchased with SingleCare won’t count toward your coverage limit, which will keep you away from or in the donut hole longer. If that’s something you’re concerned about, SingleCare gives you the option to save money on your lower-priced prescriptions that won’t get you any closer to your coverage limit, so you’ll have more to spend on your higher-priced prescriptions through your Medicare plan. Best of all, SingleCare is free to use—and always will be.