Prescription drug coverage for Medicare and Medicare Advantage enrollees is provided in two ways: Medicare Part D, which can be obtained through a stand-alone prescription drug plan, or a Medicare Advantage plan that includes prescription drug coverage. For individuals who have prescription medications with high costs, you may have experienced the Medicare Part D coverage gap, also known as the “Medicare Donut Hole.” This is when you have to pay a higher percentage of your medication costs after spending a certain amount of money on your drugs. You keep paying this higher amount up to a certain limit before your plan begins paying again. That period where you have to pay the higher costs is where the Donut Hole got its name.
The Affordable Care Act aimed to close the Donut Hole. The period where you must pay a higher proportion of your medication(s) has been reduced from what it used to be, and in 2025, Medicare beneficiaries won’t pay more than $2,000 in out-of-pocket costs for covered medications thanks to a provision in the Inflation Reduction Act of 2022. But for 2024, the Medicare “Donut Hole” still applies. The only other time when you pay the full costs of your medications is when you are accruing costs toward your deductible if your plan has one.
Take a look below at our infographic to see a high-level overview of how the Donut Hole works. Then, click on the toggles below to get an in-depth description of each phase.
*2024 Part D Deductible: $545 *2024 Initial Coverage Limit: $5,030 *2024 Coverage Gap Limit: $8,000
If you have high drug costs and are looking to enroll in Medicare soon, you will want to take great care in selecting a Part D plan. If you qualify, there is also a federal Extra Help Program to assist with drug costs. Be aware that Medicare recipients are excluded from using manufacturer copay assistance coupons that are advertised on TV, in magazines, and in doctor’s offices to reduce the costs of brand-name medications. But some manufacturers do have income-dependent assistance programs which may lower the costs of expensive drugs. Caribou’s HealthPlanning Analysis can help provide the most suitable options according to your drug coverage.
Learn More:
Closing the Medicare Part D Coverage Gap: Trends, Recent Changes, and What’s Ahead | Kaiser Family Foundation
Medicare Part D Redesign | The Commonwealth Fund
Last Revised August 8th, 2024