What is the Part D doughnut hole

Exploring the coverage gaps in Part D and what beneficiaries can do to close these gaps.

Michael Bobo

6/10/20232 min read

The Donut Hole

One of the most significant gaps in Part D coverage is the "donut hole," which refers to the gap in coverage that occurs when beneficiaries and their insurance plan have spent a certain amount on prescription drugs. In 2023, the coverage gap begins after a beneficiary and their plan have spent $4,660 on prescription medications. At this point, the beneficiary enters the coverage gap and is responsible for a larger portion of their prescription costs.

During the coverage gap, beneficiaries are responsible for paying a larger share of their prescription drug costs. In 2023, beneficiaries in the coverage gap are responsible for paying 25% of the cost of their brand-name drugs and 75% of the cost of their generic drugs. This can result in significant out-of-pocket expenses for beneficiaries.

Catastrophic Coverage

The good news is that the coverage gap ends once the beneficiary has spent a certain amount on out-of-pocket expenses. In 2023, catastrophic coverage kicks in after a beneficiary has spent $7,400 out-of-pocket on prescription drugs. Once the beneficiary reaches this threshold, they are only responsible for paying a small coinsurance or copayment for the rest of the year.

However, reaching catastrophic coverage can be difficult for some beneficiaries, especially those who need expensive medications or who have limited financial resources.

Closing the Coverage Gaps

Fortunately, there are steps beneficiaries can take to close the coverage gaps in Part D. One option is to choose a Part D plan with more generous coverage, such as one with a lower deductible, lower copayments, or a larger coverage gap threshold. Beneficiaries can compare plans using the Medicare Plan Finder tool or by working with a licensed insurance agent.

Another option is to use generic drugs whenever possible. Generic drugs are often much cheaper than brand-name drugs and can help beneficiaries reach the catastrophic coverage threshold more quickly.

Finally, beneficiaries can explore other programs that may help them pay for their prescription drugs, such as state pharmaceutical assistance programs, manufacturer patient assistance programs, or discount prescription drug cards.

Part D coverage gaps can be a significant financial burden for Medicare beneficiaries. The coverage gap, also known as the donut hole, can result in high out-of-pocket expenses for prescription drugs. However, by understanding the coverage gaps and taking steps to close them, beneficiaries can minimize their out-of-pocket costs and access the medications they need. Whether it's choosing a more generous Part D plan, using generic drugs, or exploring other assistance programs, there are options available to help beneficiaries close the coverage gaps in Part D.