What is the Donut Hole?

Definition: “Most plans with Medicare prescription drug coverage (Part D) have a coverage gap (called a “donut hole“). This means that after you and your drug plan have spent a certain amount of money for covered drugs, you have to pay all costs out-of-pocket for your prescriptions up to a yearly limit.”*

*Source: https://www.healthcare.gov/glossary/donut-hole-medicare-prescription-drug/

In other words, the Donut Hole was originally created to encourage people to opt for generic (rather than name brand) drugs whenever possible so that they were less likely to hit the set “X” amount. This thought was intended to help keep the overall cost of prescription drugs down for both Medicare beneficiaries AND the insurance companies providing the coverage.

Why is the Donut Hole Closing? 

As of this year, “X” amount is set at $3,750. Once this is hit, beneficiaries are responsible for 35% of out-of-pocket costs for all name brand drugs and 44% of generics. The catastrophic coverage to get back out of the Donut Hole is currently $5,000 and once the enrollee reaches that, they are then only required to pay 5% of these costs.* 

While the Donut Hole coverage gap had good intentions (encouraging patients to utilize generic drugs), it did not take into consideration some of the drugs that people with certain illnesses require. Most of these drug are new, name brand medications with patents that are years from expiring. Meaning that 1. There aren’t generic drugs available that work as well and 2. The donut hole is hit quicker causing high annual prescription and medication costs. Furthermore, if there are people who simply can’t afford these medications to treat their current illnesses, it could potentially spiral their condition causing even more associated costs for themselves and Medicare in the future.  

What’s to come?

Come 2019, under the Bipartisan Budget Act of 2018, the Donut Hole will be permanently closing. Plans will continue to pay 75% of all drug expenses up until “X” amount. However, beneficiaries will now only be required to pay 25% of  their prescription drugs from the time they enter the gap until they reach catastrophic coverage. Additionally, the responsibility for drug Manufacturers will increase from 50%-70%.*

It is still unknown how this will affect 2019 Part D Plans and/or the actual cost of Medications, but as these answers come to light, we will be sure to stay updated and keep you informed. If you have any questions, please call us! 1-800-627-2768