Avoiding the Medicare Part D Coverage Gap

3 Simple Steps to Stay Out of the Medicare Donut Hole

Updated on: June 29, 2018

Originally posted on: November 1, 2016
Express Scripts Medicare Advisor
Ms. Kyong specializes in personal finance issues for Medicare recipients. Topics include managing healthcare costs in retirement.

In a standard Medicare Part D plan, the third stage of coverage is the Coverage Gap (also known as the “Donut Hole”), when you will pay more for your brand-name and generic medications. You’ll want to avoid entering the Gap completely or at least delay your entry as long as you can. To learn more about the Coverage Gap and the other coverage stages for Medicare Part D plans, please watch this video.

Many seniors never enter the Coverage Gap. However, for those who take multiple medications, when your total Part D prescription drug costs exceed $3,700 in 2017, you will enter the Coverage Gap. These costs include what you pay, including your deductible and copays, and what the plan pays for the drugs covered by Part D.

If you do enter the Medicare Coverage Gap, you will pay:

  • 40% of the cost of a covered brand-name drug. The drug manufacturer will cover 50% of the cost of the drug (excluding the dispensing fee and any vaccine) and your plan will pay the remaining 10%.
  • 51% of the cost of a generic drug and your plan will cover the rest.

There are several cost-saving approaches you can take to help delay or avoid reaching the Coverage Gap.

  • Use generic drugs instead of brand-name drugs whenever possible since your copay or coinsurance costs will be lower and may prevent you from reaching the gap. A generic is FDA-approved to be just as safe and effective as the brand-name drug to treat the same condition.
  • If your plan offers preferred pharmacies in their network, try to fill your prescription at at this type of pharmacy. A preferred pharmacy will offer lower copayments or coinsurance than at a standard pharmacy.
  • If you’re taking a medication for a chronic condition, a home delivery pharmacy may also save you money. In many plans home delivery is also considered a preferred pharmacy. You can typically get a 90-day supply of the drug for less than you would pay for three 30-day prescriptions at a retail pharmacy. This will depend on the plan you choose.

If you do enter the Coverage Gap, you can still use these approaches to reduce your out-of-pocket expenses.

It’s also important to know that with the Affordable Care Act, the Medicare Coverage Gap continues to close. By 2020, you will only pay 25% of the cost for both brands and generics.

Be sure to check your plan for any changes that may occur from year to year before enrolling. It’s also a good idea to research other plans each year to make sure your plan is the best option for the medications you take.