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The Medicare Donut Hole: What Is It and How Does It Affect You?

If you have gaps in your Medicare drug coverage, you could be affected by the Medicare donut hole. If you have questions about drug coverage, a prescription drug plan, and what coverage you need, this guide has you covered. From Medigap to what your initial coverage limit is, we’ll go over everything you need to […]

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If you have gaps in your Medicare drug coverage, you could be affected by the Medicare donut hole. If you have questions about drug coverage, a prescription drug plan, and what coverage you need, this guide has you covered.

From Medigap to what your initial coverage limit is, we’ll go over everything you need to know about the Medicare donut hole.

What is Medigap?

So what is Medigap? We have the answers. Medigap is the private supplement insurance that will cover what is left after traditional Medicare benefits. This covers what you would pay out of pocket for your medical needs.

Medigap is commonly used for hospital costs, deductibles, hospice care, blood, and a foreign travel emergency. Traditionally, Medicare only covers about 80% of your medical costs. This is where Medigap comes in to fill in the rest.

Medicare Supplement Plan vs. Medicare Advantage Plans

Medicare supplement plans will help bridge the gap between your coverage and your out of pocket costs. These plans also pay for medical care when you travel outside of the United States.

Medicare Supplement Plan F and Plan G are two of the most popular Medicare supplement plans. One of the key differences between Medicare Advantage plans and Medicare supplement plans is that Medicare Advantage plans don’t cover foreign medical expenses.

The Part D Donut Hole

Medicare Part D covers prescription drugs. The coverage gap from Medicare Part D is also known as the donut hole. When your plan reaches a certain limit on what you’ve paid for drug costs, you’ve entered into the donut hole.

In 2021, you’ll see a deductible of $445. After your initial coverage period, you’ll be responsible for 25% until you reach the $4,130 limit. In this phase of Medicare Part D, you will need to pay for the percentage of your drugs that’s left uncovered after the limit is exceeded.

How the Donut Hole Works

In 2020, the donut hole was closed. This doesn’t mean there won’t still be a gap in coverage costs. Let’s say your prescription costs $100, for example.

In the initial coverage period, you’d pay your $20 copay. When you’re in the coverage gap, you’d need to pay $25 or 25%. This is where Medicare supplement plans come into play.

Getting Out of the Donut Hole

To get out of the donut hole, you need to reach catastrophic coverage. In 2021, this means your out-of-pocket costs need to reach $6,550. Once you’ve paid this much for your prescription drugs on your own, you’ve entered into the Catastrophic Benefit period.

2021 Donut Hole Cost Breakdown

This breakdown shows what Medicare beneficiaries will pay in 2021 for prescription drugs with Medicare Part D:

  • Your deductible of up to $445, depending on your plan
  • 25% of prescription drug costs during the Initial Coverage Period
  • In a plan without a deductible, you wouldn’t pay more than $1,032.50
  • Up to $6,550 out-of-pocket until you hit the Catastrophic Benefits Period
  • Medicare beneficiary will then pay for 5% coinsurance or a $9.20 co-pay for name-brand prescriptions and $3.70 for generic prescriptions

Medicare Donut Hole 101

The Medicare Donut hole is the gap you’re responsible for after your Medicare benefits have reached the limit. To make up for this gap, Medicare supplement plans help to cover any out of pocket costs.

For more information on Medicare supplement plans and finances, check out the blog section for more helpful resources and guides.

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