The Medicare Donut Hole Is Closed:
What Does That Mean?
When first implemented in 2006, the Part D drug plan had a gap in coverage. Drug plans did not pay anything toward the cost of drugs in the donut hole so beneficiaries were stuck with the tab for the entire cost. Beginning in 2011, the Affordable Care Act (ACA) took measures to close the donut hole, known as the Coverage Gap. Over the last few years, beneficiaries have paid less for drugs.
Here's what happened. In 2012, the ACA implemented discounts for the Coverage Gap. In 2019, discounts meant that beneficiaries paid 25% of the cost for any brand-name medication, officially closing the donut hole, and 37% for generics. Now, now the donut hole for generic drugs is also closed.
So, the donut hole has closed for all medications. Many think that means they won’t have to pay for medications once they get to this drug payment stage. But that is not the case. Going forward, drug plan members will pay 25% of the cost for any prescribed medication from the time they meet the deductible until reaching the out-of-pocket spending limit ($6,350 in 2020) that leads to Catastrophic Coverage.
Even with these changes, some beneficiaries will experience sticker shock. That’s because their drug plans charge a copayment or coinsurance in Initial Coverage, instead of 25%. Here's an example.
In the Initial Coverage payment stage, Laura's insulin has a $47 copayment. Once she lands in the donut hole, she is responsible for 25%. Because the full cost of the insulin is $475, she will pay $118.75.
Read more about the drug plan payment stages.
Closing the donut hole may or may not reduce costs in the Coverage Gap. Those who end up in that payment stage will still have to pay 25% of the cost of medications.