You may have heard that the “donut hole is closing.” The Affordable Care Act gradually eliminated the gap in coverage for prescription drugs, known as the donut hole. Previously you paid for 100% of your prescription drugs once you entered the donut hole. Now you will pay no more than 25% once you reach the donut hole coverage amount so you will always have some help paying your prescription drug costs.
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 $445 in 2021. 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 2021, the donut hole begins when the member and their Part D plan together have paid a total of $4.130.
Members are in the donut hole. While in the donut hole in 2021, members will pay 25% of the price of a brand-name drug. Almost the entire cost of a generic or 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. Unlike with brand-name drugs, only the amount you pay for generics will count toward your total out-of-pocket expenses.
Members reach catastrophic coverage. Once members must reach the annual out-of-pocket limit on the cost of their medications. In 2021, that amount to reach when catastrophic coverage kicks in is $6,550.