Is the Medicare Donut Hole Really Closed?

This week, Craig Siminski, of CMS Retirement Income Planning, shares an article discussing the four stages of Part D prescription drug coverage, and how prices can vary in the coverage gap:

You may have heard that the coverage gap for Medicare Part D prescription drug coverage — commonly known as the donut hole — closed in 2020.

While it’s true that recent changes should reduce costs for many beneficiaries, the coverage gap still exists, and costs for some prescriptions may increase in the gap.

Here’s an overview of the four stages of Medicare Part D prescription drug coverage and how prices can vary in the coverage gap. Note that this does not apply to prescription drug coverage offered through Medicare Advantage (Part C) plans:

Stage 1 — Deductible

Most Part D plans have an annual deductible that cannot exceed $445 in 2021. You pay the full negotiated price for your prescriptions until you meet the deductible.

Stage 2 — Coverage

After you meet the deductible, your plan covers part of the cost of your prescriptions. With the standard Medicare model, you would pay 25% of the cost and the plan would pay 75%. However, few plans follow the standard model. Most have varying copays or coinsurance for drugs at different “tiers” — for example, progressively higher copays for generics, preferred brand-name drugs, non-preferred brand-name drugs, and very high-cost drugs. This coverage continues until…

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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 22 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.

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