Medicare Donut Hole 2021
Medicare Part D Donut Hole 2021
Medicare donut hole is a coverage gap in Medicare Part D that can affect your out-of-pocket costs in 2021. You may have heard the donut hole closed on January 1, 2020. Many people were excited because they believe their drug coverage will be free. However, you still have 25% coinsurance inside the Donut Hole.
Medicare Part D drug plans have four stages, as follows:
- Deductible – you may pay a deductible of $445 in 2021, depending on your drug tiers. After paying the deductible, you enter stage 2.
- Initial Coverage – you pay only 25% copays for your prescription drugs. After your plan spends $4,130 in 2021, you enter stage 3.
- Coverage Gap “Donut Hole” – you pay 25% coinsurance for brand-name and generic drugs. After total out-of-pocket drug costs are $6,550 in 2021, you enter stage 4.
- Catastrophic Coverage – you pay a small coinsurance amount or copayment for covered drugs for the rest of the year.
A Brief History of The Donut Hole
When the Affordable Care Act passed in 2010, also known as ObamaCare, the donut hole had been slowly closing. In 2019, you paid 25% for brand-name drugs and 37% for generic drugs while in the “donut hole.” In 2020, the 37% coinsurance for generic drugs in stage three reduced to 25%.
The 25% coinsurance you pay in the “donut hole” has remained the same in 2021. However, the total amount you spend inside the “donut hole” has increased from $6,350 in 2020 to $6,550 in 2021.
Medicare Part D Coverage Gap 2021
Medicare Part D has a coverage gap called the Donut Hole. You enter the donut hole (coverage gap) when your prescription drug plan spends $4,130 in 2021. On the other hand, if you spend less than $4,130 in your Medicare drug plan, you will not enter the donut hole.
Furthermore, people with specific income and resource limits may qualify for Extra Help program. People who get Extra Help paying Part D costs will not enter the donut hole.
Coverage Gap for Brand-name Drugs
In 2021, after you have spent $4,130 in your Medicare drug plan, the most you will pay for brand-name prescription drugs is 25%. While inside the donut hole, you will spend a maximum of 25% for each brand-name prescription drug you buy.
For brand-name drugs, 70% of the discount price will count to help you get out of the donut hole. Thus, only 5% will not count towards helping you get out of the donut hole.
Coverage Gap for Generic Drugs
In 2021, Medicare will pay 75% of your generic drug price, and you pay the remaining 25%. However, none of this 75% discount will apply towards getting you out of the donut hole. Unlike brand-name drugs, only the 25% you pay will count in the coverage gap.
Thus, if you only pay for generic drugs while in the donut hole, it will take you much longer to get out. Most likely, you will continue to pay 25% until the end of your coverage period.
Medicare Donut Hole expenses
How much you pay while in the donut hole will depend on your drug tiers. People who have Tier 3 or higher drugs may spend thousands per month. For example, a box of five Humalog KwikPens for Type 2 diabetes costs can cost over $600 (Healthline).
Depending on how many boxes you need, insulin could cost you thousands per month. You pay 25% of drug costs while inside the donut hole. Thus, you would pay $450/month (25%) if your insulin costs $1800.
Fastest Way Out of The Donut Hole
How can you speed your way out of the donut hole? We recommend you switch from generic drugs to name-brand drugs. Before you change medications, make sure your plan covers the name-brand drugs. After you switch to name-brand prescriptions, 70% of the discounted price will go towards your out-of-pocket expenses. Therefore, you will move out of the donut hole faster.
Once you exit the donut hole, you enter the catastrophic coverage (stage 4). Then you only pay a small coinsurance or copayment for the rest of the year.