What is the Coverage Gap (Donut Hole)?

The cost of the average drug plan is under $30/mo, which barely pays for 1 prescription. The Coverage Gap (donut hole) was meant to control drug costs and keep the program sustainable. Here’s how it works:

THERE ARE 4 “STAGES” IN A DRUG PLAN (based on a calendar year):
1. Deductible
2. Initial Coverage
3. Coverage Gap (donut hole)
4. Catastrophic Coverage

STAGE 1 – Deductible
If your plan has a deductible, you pay 100% for your meds until the deductible has been satisfied. Note: Some plans waive the deductible for generic meds.

STAGE 2. Initial Coverage
In this stage, you pay the plan’s copays for your meds

STAGE 3. Coverage Gap (Donut Hole)
Medicare tracks the retail cost of the drugs you take. If the retail cost of your medications goes over $5,030 in the calendar year (2024), you enter the Coverage Gap (donut hole). During this stage, you no longer pay your copays. Instead, you pay about 25% of the cost of your meds.

Nobody likes to pay more for their meds but consider this… there was NO Medicare drug coverage until George W. Bush signed it into law in 2006. And you used to have to pay 100% of your drug costs in the coverage gap (donut hole). Now you only pay 25% and that figure gets lower and lower every year.

STAGE 4. Catastrophic Coverage
After your yearly out-of-pocket drug costs reaches $8,000 in the calendar year (2024), the plan will pay all of your Medicare covered Part D drug costs for the rest of the year.

Also, if you buy drugs outside of your plan (ie from Canada, etc) they will not count toward the donut hole.

NOTEWORTHY: If you’re headed toward the donut hole, be sure all of your medications are in your plan’s formulary. Why? Because any drugs that are not in the formulary will not be covered by your plan and therefore will not count toward the donut hole. Also, if you buy drugs outside of your plan (ie from Canada, etc) they will not count toward the donut hole.

Note: This post is to provide basic information. Be sure to consult your prescription drug plan’s literature for complete details.