The 2020 generic
Donut Hole discount will increase to 75% of retail
costs (you pay 25% of the retail cost for generic formulary drugs). You get credit for the 25% of retail cost that you pay toward meeting your True Out-of-Pocket cost threshold (
TrOOP) or Donut Hole exit point.
The brand-name Donut Hole discount will continue to be 75% of retail cost for all brand-name formulary medications purchased in the Donut Hole (you pay 25% of the retail cost and receive 95% credit toward TrOOP).
This means that the Donut Hole for brand-name and generic drugs will be considered
"closed" since you will not pay more than the CMS standard 25%
co-insurance for your Coverage Gap formulary drug purchases.
Since the Donut Hole is closed, will I pay the same drug price if I reach the Donut Hole?No. If you enter the Donut Hole, your drug costs may decrease - or increase depending on
your Medicare Part D plan’s cost-sharing (what you are paying before
entering the Donut Hole) and your plan's negotiated retail drug cost.
For example, if your Tier 3 brand-name medication has a negotiated
retail cost of $300 and your Medicare Part D plan has a $47 co-pay for
this drug during your Initial Coverage Phase, you would find that you
will pay more for your medication when you enter the Donut Hole ($75) -
even with the Donut Hole discount.
You can
click here to see other examples of how your drug costs can change with the Donut Hole discount.
Why do I get 95% of the retail drug cost credited to my TrOOP? The 75% brand-name drug discount is split into two parts:
-
The first portion, is a 70% discount paid by the brand-name drug manufacturer (an increase from the 50% that the brand-name drug manufacturer has been paid since 2011).
- The additional 5% discount is considered Medicare Part D plan coverage and is paid by your Medicare Part D prescription drug plan. Since this additional 5% brand-name drug discount is paid by your plan and considered plan coverage, the 5% does not count toward getting out of the Donut Hole or meeting your TrOOP.
Therefore, the 70% of the brand-name discount – the portion paid by the manufacturer - along with the 25% of the retail price that you pay, will both count toward your TrOOP.
An example of a $100 drug purchase in the Donut Hole
In
2020, if you buy a brand-name drug that has a retail price of $100, you
will pay $25 (a 75% discount). For this Donut Hole purchase, $95 will
count toward getting out of the 2019 Donut Hole (or meeting your
2020 TrOOP limit of $6,350 ) – the $25 you paid
plus
the $70 brand-name drug discount paid by the drug manufacturer. As
noted above, the extra $5 portion of the discount will not count toward
TrOOP because it was paid by your Medicare Part D plan and is considered
plan coverage.
However, if you purchase a $100 generic medication while in the 2020
Donut Hole, you would pay $25 (receiving a 75% discount), but only the
$25 you paid would count toward your 2020 TrOOP or Donut Hole exit
point.
The following chart shows how the cost of a $100 brand-name drug purchased in the Donut Hole has changed over the years - and how your TrOOP credit has changed.
The Donut Hole discount and non-formulary drugs
If you are using a drug that is
not covered by your Medicare Part D plan, you
will not receive the Donut Hole discount. The Donut Hole discount only applies to formulary drugs. However, you can speak with your Medicare Part D plan’s Member Services department about getting a “
formulary exception” for the non-formulary drug so that you will receive coverage for the drug and the Donut Hole discount will apply. The toll-free number for Member Services is on your Member ID card.
Extra Help and the Donut Hole Discount
If you are eligible for the
Medicare Part D Extra Help program or Low-Income Subsidy, then you will not have a “Donut Hole” in your coverage and your drug costs will not change until reaching Catastrophic Coverage where you will pay even less for your formulary drugs (you can read more about Catastrophic Coverage here
https://Q1FAQ.com/715.html ).
To learn more, you can read about the 2020 Donut Hole in our article:
Understanding the 2020 Medicare Part D Coverage Gap or Donut Hole