Medicare Donut Hole 2022 – The Medicare donut hole or coverage gap is found in every Part D plan, whether you have an individual policy or if it is wrapped into your Medicare Advantage plan. For those of you who take expensive medications, the donut hole is definitely something to be aware of, and you should take a few minutes to learn about how it works so you’ll better understand your prescription drug coverage.
What is the Medicare donut hole?
The coverage gap has been around for as long as Part D plans have existed in Medicare. It is a gap in your prescription drug coverage during which you’ll pay more for your medications. So, how does the donut hole work?
The donut hole occurs during the third stage of your Part D coverage. The four stages are:
- Deductible Phase
- Initial Coverage Phase
- The Coverage Gap
- Catastrophic Coverage
When you find yourself in the donut hole, you’ll pay up to 25% of the cost for all of your medications. This is a significant jump from when you were in your initial coverage phase. The bright side is that it used to be worse. Prior to 2020, you paid up to 37% of the prescription cost. Since the percentage has dropped, you may even hear some insurance companies say the donut hole no longer exists. That’s simply not true, although it has gotten a little more affordable.
Donut Hole Thresholds in 2022
Let’s talk about when you will find yourself in the donut hole in 2022 (and how to get out of it).
Once you and your insurance plan have paid a total of $4,430 in a plan year, you will exit the initial coverage phase and enter the coverage gap. (We’ll discuss numbers as of 2022, but these typically go up each year.)
You can exit the coverage gap after you’ve spent $7,050 out-of-pocket. This portion does not include anything your plan might have paid. Amounts considered in your out-of-pocket costs include:
- Any amount you pay for covered prescriptions
- Discounts you receive on covered, name-brand prescriptions
For example, if you got a manufacturer discount of 70%, that amount will count towards your out-of-pocket costs. You pay 25%, which also counts. However, the 5% that was paid by your Medicare Part D or Medicare Advantage plan does not count towards the maximum.
If you need to purchase a prescription that is not included in the plan’s drug formulary, that expense is not included in the total amount.
Once you’ve spent the full $7,050, you’ll be on the other side of the coverage gap and into the catastrophic coverage phase. During this last phase, you’ll pay a maximum of 5% for your prescription drugs.
How To Avoid the Medicare Donut Hole
Sometimes, the coverage gap just can’t be avoided. However, there are a few things you can do to postpone the gap for as long as possible.
Use generic prescriptions. If at all possible, try to use generic drugs instead of name-brand ones. If you and your plan both pay less, it’ll take you longer to reach your initial coverage limit.
Use preferred pharmacies. All Part D plans have pharmacy networks. You’ll get the lowest prices at a preferred pharmacy, so make sure you choose one from the company’s preferred list. You may even consider ordering your prescriptions online, as this could have even more cost savings.
Ask for discounts. You might be surprised at what kind of discounts are out there if you look. You can start by asking your doctor if they have any coupons. Or call the drug manufacturer directly. You can use this trick even when you are in the donut hole to get additional savings.
Have your plan reviewed. Every year during the Annual Enrollment Period, you should have your insurance agent review your plan. Part D (and Medicare Advantage) plans change every year. You might like your coverage now, but it’s possible that you won’t have the same coverage next year. Make sure to get your plan reviewed, so you’re on the one with the least out-of-pocket spending.
Apply for Extra Help. Extra Help is a government program that offers low-income individuals financial assistance with prescription costs. If you are eligible for this program, many of your prescriptions can be paid for. Plus, you’ll never have to worry about the donut hole.
Medicare’s coverage gap isn’t easy to understand, and we’re here to help. If you find yourself in the Part D donut hole, give us a call. We’ll take a look at your plan and make sure you’re doing everything you can to reduce your prescription costs.
Learn how Medicare Part D works here!
