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Health Care Reform:

Health Insurance & Affordable Care Act

Back to ACA Health Insurance Terms List

Donut hole

The donut hole fills the gap in Medicare Part D prescription drug coverage. The donut hole is a temporary limit on what Part D will pay for medicines. 

Here's how it works: 

Members pay for all medicines to reach a deductible. Before Medicare helps pay for any medicines, each year members must pay the full deductible. Plans vary, but your deductible cannot be over $360 in 2016. Some plans do not have a deductible. 

Medicare then shares your drug costs. The Medicare member starts by paying a percentage of the cost of medicines, with the Part D plan paying the rest (it could also be a copay). 

A maximum amount is reached. When the costs reach a certain amount, coverage ends and the donut hole begins. In 2016, coverage ends when the member and their Part D plan together have paid a total of $3,310.  

Members are in the donut hole. While in the donut hole in 2016, members will pay 45% of the price of a brand-name drug. However, almost the entire cost of a brand-name drug – the amount you pay, plus the amount your plan pays  -- will count as out-of-pocket costs. That will add up and help you get out of the coverage gap. Members will pay 58% toward generic drugs during this period. However, unlike with brand-name drugs, only the amount you pay for generics will count toward your total out-of-pocket expenses. The donut hole is scheduled to close by the year 2020. At that time, members will pay no more than 25% of the cost of their medicines while in the gap. 

Members have to reach a new maximum. Before the Part D plan starts to help pay for covered medicines again, members must pay the yearly limit on the cost of their medications. In 2016, that amount is $4,850.  



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