2020 Medicare Part D Coverage Gap (AKA donut hole)

March 26th, 2020 - Chris Woolstenhulme, QCC, CMCS, CPC, CMRS
Categories:   Medicare   Drugs|Pharmaceuticals|FDA  
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Not every Medicare drug plan has complete coverage for prescription drugs - most have some sort of coverage gap, known as the “Donut Hole”. The coverage gap is a temporary limit on coverage under the drug plan. This coverage gap will not affect everyone and begins after you have used a certain dollar amount for covered drugs.

For example, in 2019 once you have used $3,820 of your drug benefits, you are in the coverage gap for any costs after this benefit has been reached. In 2020 the allowed amount is changing to $4,020; this amount is subject to change each year. If a beneficiary has help paying for Part-D they will not enter the coverage gap.

CMS explains how Brand-name and Generic drugs are paid for;

Brand-name prescription drugs

Once you reach the coverage gap, you'll pay no more than 25% of the plan's cost for covered brand-name prescription drugs. You get these savings if you buy your prescriptions at a pharmacy or order them through the mail. Some plans may offer higher savings in the coverage gap. The discount will come off the price that your plans have set with the pharmacy for that specific drug. 

Although you'll pay no more than 25% of the price for the brand-name drug, 95% of the price—what you pay plus the 70% manufacturer discount payment—will count as out-of-pocket costs which will help you get out of the coverage gap. These items aren't counted toward your out-of-pocket spending:

  • What the drug plan pays toward the drug cost (5% of the price)
  • What the drug plan pays toward the dispensing fee (75% of the fee)

Generic drugs

In 2019, Medicare will pay 63% of the price for generic drugs during the coverage gap. You'll pay the remaining 37% of the price. For 2020 and beyond, Medicare will pay 75% of the price for generic drugs during the coverage gap, and you'll pay the remaining 25% of the price. The coverage for generic drugs works differently from the discount for brand-name drugs. For generic drugs, only the amount you pay will count toward getting you out of the coverage gap. 

Items that count towards the coverage gap

  • Your yearly deductible, coinsurance, and copayments
  • The discount you get on brand-name drugs in the coverage gap
  • What you pay in the coverage gap

Items that don't count towards the coverage gap

  • The drug plan premium
  • Pharmacy dispensing fee
  • What you pay for drugs that aren’t covered 

Part D 2020 Cost change summary

Max deductible

$435

IRMAA individual minimum income

$87,000

IRMAA married minimum income

$174,000

Generic/brand cost in coverage gap

25%

National Base Beneficiary Premium

$32.74

Initial Coverage Limit

$4,020

Out of pocket threshold

$6,350

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