Not exactly. You will stay in the 2014 Donut Hole until your total out-of-pocket spending (not including monthly plan premiums) exceeds the $4,550 threshold - less any brand-name drug discounts you receive while in the Donut Hole (Click here to read more).

(1) The total negotiated retail value of your medications: When the total value of the retail cost of your drug purchases exceeds $2,850, you go into the 2014 Donut Hole.

(2) Total Out-of-Pocket Spending: After your actual spending for covered medications has reached $4,550, you exit the Donut Hole. (Remember, the brand-name discount counts toward meeting this total out-of-pocket spending amount).

For example, if you are in your Medicare Part D plan’s Initial Coverage Phase, purchase a medication with a $100 retail cost, and only pay a $30 co-payment out of your own pocket (the plan pays the other $70), you get $30 credit toward the $4,550 Donut Hole exit point and $100 toward your $2,850 Initial Coverage Limit.

Now when you are in the Donut Hole and you buy the same $100 medication, and your plan does not have any Donut Hole coverage, you will get a 52.5% discount on all brand-name drugs bought in the Donut Hole, or a 28% discount on generic drugs purchased in the Donut Hole.

If your $100 medication was a brand-name drug, then you will pay only $47.50 - but, you will get credit for the $97.50 toward meeting your $4,550 out-of-pocket threshold or Donut Hole exit point. This $97.50 represents the $47.50 that you paid and the $50 that was paid on your behalf by the brand-name drug manufacturer. You do not get credit for the $2.50 that was paid by your Medicare Part D plan.

If the $100 medication was a generic drug, you would pay $72 dollars and you would get credit toward meeting the $4,550 Donut Hole exit point or out-of-pocket threshold only for the actual $72 you spent.