Medicare Part D Coverage Gap

By Gary Phillips

Most Medicare drug plans have a coverage gap (often called the “donut hole”). This is a temporary limit on what the drug plan will cover for drugs. Not everyone will enter the coverage gap. The coverage gap begins after you and your drug plan have spent a certain amount for covered drugs. (People who get Extra Help paying Part D costs won’t enter the gap.)

What is a “Donut Hole”

Once in the coverage gap, you get a 50% manufacturer discount on covered brand-name drugs, however, the entire price will count as out-of-pocket spending, which will help you get out of the coverage gap sooner. You’ll also pay only 86% of the plan’s cost for covered generic drugs until you reach the end of the coverage gap.

Items that count towards the coverage gap would be your yearly deductible, coinsurance, and copayments, the discount you get on brand-name drugs in the coverage gap and what you pay in the coverage gap. (See Paying For Medicare Part D)

Items that DON’T count towards the coverage gap are the plan premiums and the cost for any non-covered drugs.

5 Ways to Lower Your Costs in the Coverage Gap

  1. Consider Switching to Generics or Other Lower-Cost Drugs (speak with your doctor).
  2. Pharmaceutical Assistance Programs.
  3. State Pharmaceutical Assistance Programs.
  4. Explore National and Community-Based Charitable Programs.
  5. Apply for Extra Help: Medicare and Social Security have a program for people with limited income and resources that help you pay for prescription drugs. If qualified, you could pay between $1-$6 for each drug. Apply with Social Security online or by calling 1-800-772-1213. TTY users should call 1-800-325-0778.

After the Gap: Catastrophic Coverage

Once you get out of the coverage gap, you automatically get “catastrophic coverage.” This assures that you only pay a small coinsurance amount for covered drugs for the rest of the year.

What Medicare Part D Plans Cover

Each plan has its own list of covered drugs (“formulary”). Many plans place drugs into different “tiers” on their formularies. Drugs in each tier have a different cost. Check to make sure that your medication is on the plan’s formulary and which tier it falls under.

Tip: The first time you use your new drug plan you should come to the pharmacy with your red, white, and blue Medicare card, a photo ID and your plan membership card. If you have both Medicare and Medicaid or qualify for Extra Help with drug plan costs, you should also bring proof of your enrollment in Medicaid or proof that you qualify for Extra Help.

About the Author

Gary Phillips is a licensed insurance agent based in western North Carolina. He specializes in the senior market and is knowledgeable in multiple insurance lines including Medicare, Medigap, Long-Term Care, Part D Prescription Drugs, Part C Medicare Advantage, Health, Life and Final Expense insurance. He also enjoys writing and helping others.

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