The Medicare Donut Hole Is Closing:
What Does That Mean?
The Affordable Care Act (ACA) has taken measures to close the donut hole in a Part D prescription drug plan. Over the last few years, beneficiaries have paid less for drugs in the Coverage Gap. Now, for brand-name medications, in 2019, the donut hole has closed, one year earlier than initially planned. 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.
Here is what’s happening. 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.
In 2012, the ACA implemented discounts for the Coverage Gap. In 2018, those in the donut hole paid 35% of the cost of brand-name drugs and 44% for generics. In 2019, beneficiaries will pay 25% of the cost for any brand-name medication. Then, in 2020, the donut hole for generic drugs will close. Drug plan members will no longer face an increased cost for medications. They 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.
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. That's less than she pays now ($166) but still costly.
Read more about the drug plan payment stages.
Closing the donut hole will simply 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.