Yes. If your Medicare Advantage plan includes prescription
drug coverage (
MAPD), then the Donut Hole or Coverage Gap portion of your coverage works just like a stand-alone
Medicare Part D prescription drug plan (or
PDP).
Question: But isn't the Donut Hole now closed?
Not exactly. Although we say that the Donut Hole "closed" in 2020 since you receive a 75% discount on all formulary drugs, you will still leave your Medicare Part D plan's Initial Coverage Phase once your retail drug costs exceed the Initial Coverage Limit. And when you leave your Initial Coverage Phase, you will enter the Coverage Gap
(Donut Hole) where the cost of your formulary medications can
increase, decrease, or stay the same - depending on your Medicare drug plan, your cost-sharing, and the drug's retail price. You can click on our FAQ "
Did the Coverage Gap or Donut Hole just close up and go away?" to read more.
(1) Entering the Donut Hole or Coverage Gap
You will enter the Donut Hole based on the total
negotiated retail value of your medication purchases. For example, when the total retail cost of
your drug purchases exceeds the standard
Initial Coverage Limit of $4,660 (
$5,030 in 2024),
you will leave your Medicare plan's Initial Coverage Phase (where you
share the cost of your prescriptions with your Medicare plan)
and enter into the Donut Hole.
See
Will I enter the Medicare Part D Coverage Gap or Donut Hole this year? for upcoming changes to the Donut Hole.
(2) Exiting the Donut Hole or Coverage Gap
You will exit the Donut Hole based on your total out-of-pocket spending (or
TrOOP)
limit. For example, in 2023, the TrOOP limit or Donut Hole exit point
is reached after your actual out-of-pocket spending for covered
medications has reached $7,400 (
$8,000 in 2024).
Keep in mind that 2023 is the last year that Medicare Part D
beneficiaries will pay cost-sharing in the Catastrophic Coverage phase.
For plan year
2024,
the
Inflation Reduction Act (IRA) of 2022 eliminates beneficiary cost-sharing in the Catastrophic Coverage phase.
Your discount on drugs in while in the Donut Hole
Remember, while you are in the Donut Hole, 70% of the
brand-name drug
discount that is paid by the drug manufacturers counts toward meeting this total out-of-pocket spending amount.
Here is how this works: If you are in your Medicare Advantage plan's 2023 Initial
Coverage Phase (before reaching the Donut Hole), and you purchase a medication with a
$100 retail cost, and pay your Medicare plan's co-payment (for example, $30) out
of your own pocket, and the Medicare plan pays the other $70, you get $30 credit
toward the $7,400 Donut Hole exit point and $100 toward your $4,660 Initial
Coverage Limit.
If you exceed the 2023 Initial Coverage Limit of $4,660 and enter the
Donut Hole, and if you buy the same $100 medication, and your Medicare
plan
does
not provide any additional Donut Hole coverage, you will get a 75%
Donut Hole discount on all formulary drugs bought in the Donut Hole (you pay 25% of retail).
Going back to our previous example, if your $100 medication was a
brand-name drug, then you
will pay only $25 (25% of $100) in the Donut Hole - but since you purchased
a brand-name drug, you will get credit for $95 toward meeting
your $7,400 out-of-pocket threshold or 2023 Donut Hole exit point. This
$95 credit represents the $25 that you
paid for the brand-name formulary drug and the $70 that was paid on your
behalf by the brand-name drug
(pharmaceutical) manufacturer. You do not get credit for
the $5 portion of the retail cost paid toward the brand-name discount by
your Medicare plan.
If you purchase a generic drug in the Donut Hole with a $100 retail value, you will get the 75% generic
Donut Hole discount, pay $25 and the $25 you spent will count toward meeting your $7,400 TrOOP limit or 2023 Donut Hole exit point.
Your Medicare Advantage plans Part A and Part B MOOP vs. Part D TrOOP
As another reminder: Your Medicare Advantage plan (MAPD) has two maximum limits - one limit for
Medicare Part A and
Medicare Part B spending (
MOOP) and one limit for drug spending (
TrOOP):
(1) Your Medicare Advantage plan's
MOOP
- or maximum out-of-pocket limit establishes the maximum amount you
will pay in a year for your in-network Medicare Part A and Medicare Part
B coverage (with some possible plan exceptions). A Medicare Advantage
plan can change the plan's MOOP limit each year, but in
2023, the MOOP limit cannot be over $8,300 and
2023, the MOOP limit cannot be over $8,850(for in-network care).
(2) Your total out-of-pocket limit (
TrOOP)
for your Medicare Part D prescription drug purchases. When you exceed
the 2023 TrOOP limit of $7,400, you enter the
Catastrophic Coverage
portion of your Medicare prescription drug coverage and pay a
significantly reduced amount for your medications (for example, for
brand-name medications purchased in the Catastrophic Coverage phase, you
will pay the greater of 5% of the retail cost or $10.35).
Keep in mind that 2023 is the last year that Medicare Part D
beneficiaries will pay cost-sharing in the Catastrophic Coverage phase.
For plan year
2024,
the
Inflation Reduction Act (IRA) of 2022 eliminates beneficiary cost-sharing in the Catastrophic Coverage phase.
Read about the new Rx MOOP in:
What is the Medicare Part D RxMOOP?