COVERAGE GAP (DONUT HOLE)

The Donut Hole, technically the Coverage Gap, perhaps the most misunderstood part of Medicare Drug Plans, is literally a point in the year where you have less coverage.  It used to be so bad that you had no coverage at all, but Medicare improved it now so it is just less coverage.

Each time you pick up a medication that is covered by your drug plan, Medicare takes the total cost of the drug (not your copay or coinsurance alone) and puts it into a pile.  This starts at the beginning of the calendar year.  Once that pile reaches a certain threshold, $4,130 for 2021, you are in the donut hole and your drug costs change to 25% of the total cost, which means most of them go up alot, especially for brand. For example, if you paid $45 copay for an expensive brand name drug throughout the year, but the total cost was $500 per fill, and you only had that one medicine all year long, then you would go in the donut hole approximately September.  When I do the math on that - $500 total cost x 8 months = $4000 in August (the eighth month) - I can see that on my next fill in September I will cross the threshold into the donut hole propelling my cost up to approximately 25% of $500, or $125.  There is an oddity here: the month you cross the threshold into the donut hole part of the fill is under the $45 copay and part is under the 25% of the total.  This causes the price to be only approximate in the month you cross into the donut hole.  However, during the next month or the next fill your price will be exactly 25% of the total and you can see that on your monthly drug summary sent to you by your drug plan.

Most Medicare drug plan beneficiaries don't ever hit the donut hole.  And many that do hit it in November or December, which doesn't create such a financial burden since everything refreshes, or starts right over again, in January.  In other words, starting in January you are no longer in the donut hole and it takes another 8 or so fills to hit the donut hole depending on your drug list and the threshold for next year.  Not that hitting the donut hole in November or December is easy, it's just not nearly as bad as hitting it in the summer or even late spring as some people do who have 2 or 3 $500 medicines (or sometimes more expensive than that).  So the donut hole doesn't affect a larger portion of Medicare beneficiaries, but it is enough that all who have expensive brand name drugs should be paying attention BEFORE they hit the hole.

The best way to do that is to monitor your year-to-date total drug costs on your monthly drug summary mailed or emailed to you by your drug plan (not from Medicare itself).  All drug summary will have a spot, usually a the bottom of page 2 or the top of page 3 depending on formatting, that tells you this information.  With that, you can see clearly if your getting close to hitting the donut hole or if you are on pace to hit it later in the year.  For example, if your March summary shows YTD total drug costs (not your out of pocket costs) of $2000, then you know you are on pace, assuming you continue to fill meds like you had been from January to March, to hit the donut hole in about 3 more months.  Doing the math, it took three months to hit $2000 so it would take about three more months to add another $2000 putting you right on the threshold of crossing into the donut hole which starts just over $4000.

Year to year, the threshold of started and exiting the donut hole is adjusted upward slightly.  You get a letter of year to year changes from your drug plan (or Medicare Advantage plans that cover drugs) telling you specific changes to the donut hole and the plan as a whole.  They arrive in late September or early October and they are called Annual Notice of Change (ANOC).

EXCEPTION: If you have any level of Extra Help then the donut hole is automatically waived.  Just to be clear, you have no concern whatsoever about hitting the donut hole unless you lose your Extra Help.

ALL PLANS HAVE A DONUT HOLE:  It is only natural for a person to try to get away from this whole thing.  One way might be to buy a better drug plan that has no donut hole.  While it is possible to buy a drug plan that is called an enhanced plan (the actual name might not be enhanced) that covers generic T1 & T2 drugs at normal pre-donut hole copays if you fall into the hole, there is no plan that does that for brand name T3, 4 & 5.  And that is by far the real problem here, those expensive T3, 4 & 5 medicines.  So we certainly recognize the value of getting a plan that has coverage through the gap, it doesn't solve the lion's share of the expenses when and if you fall in the hole.

THE DONUT HOLE NO LONGER EXISTS??:  The donut hole, technically called the coverage gap by Medicare and the drug plans, used to be 100% cost to the beneficiary when you fell in.  Wow!  Starting in 2012, that number began to fall year by year until finally, in 2020, you only pay 25% when in the hole.  Medicare, in their handbooks and training manuals, has been saying for years, as they do now, that the reduction in donut hole costs from 100% to 25% means there is no coverage gap.  However, every drug plan in the country shows on their summary of benefits that after the initial coverage stage you then move to the the coverage gap stage.  Add that to the fact that your drug costs generally do go up in the coverage gap phase (donut hole), it seems that the coverage gap is improved but not removed.

GOING THROUGH THE DONUT HOLE ONCE IN:  Getting out of the donut hole is tricky to explain.  First, just know of that approximately 8-13% of Medicare beneficiaries go into the donut, but few ever make it out.

POINT OF CONFUSION: It is common for people to try to change plans to fix the donut hole.  However, the donut hole will follow you wherever you go and on whatever Medicare drug plan you switch to.  Once your in, your in for the year.  That is why it is key to monitor your progress towards it and potentially take evasive action to avoid or delay it if that is possible in your circumstances.

AVOIDING OR DELAYING THE DONUT HOLE: