Medicare “Donut Hole” Closing Earlier
February 27, 2018 | Katie Haug, Individual Advisor
The Medicare coverage gap, or “donut hole”, will close a year earlier for those beneficiaries reaching a certain threshold with high annual prescription drug costs. Under the recent budget deal signed by President Trump, the donut hole will close in 2019.
The coverage gap was initially set to close in 2020, when Medicare beneficiaries would be expected to pay 25 percent of their prescriptions while they were in the donut hole. Instead, starting next year, Medicare Part D enrollees will pay 25 percent of the prescription costs from the time they enter the coverage gap until they reach catastrophic coverage.
Part D covers prescription medication costs for enrollees as an optional add-on portion to traditional Medicare. For years, Part D paid all prescription costs up to a certain level and the beneficiaries were responsible for the remaining costs. The amount that Part D would pay and the amount enrollees were responsible for created a growing gap, which many beneficiaries were caught in even though they had insurance. The donut hole has been narrowing each year since the Affordable Care Act was passed in 2010.
This year, the threshold for entering the donut hole remains at $3,750. After passing the limit, Medicare enrollees are in the gap and will have to pay 35 percent of the cost of brand-name drugs and 44 percent of generics. Those costs will need to be paid until the enrollee’s out-of-pocket spending reaches $5,000. After reaching the limit, the Medicare beneficiary will no longer be in the donut hole and will pay no more than 5 percent of their drug costs for the remainder of the year.