What is the Donut Hole, Gap, Coverage Gap

by Doug Benson on November 10, 2010. Updated July 19, 2013

in Glossary, Prescriptions

Also Known As The Gap, Coverage Gap, and several four-letter words 🙂

Donut Hole, Coverage Gap, The Gap – Most Part-D plans have a coverage gap, which is usually referred to as the “donut hole.” This is a confusing aspect to the Part-D plans that many people have never had explained properly.

How does the Donut Hole Work?

Each year on January 1st, your Prescription Plan starts totaling the retail cost of your prescriptions. When you look at your monthly statement from your Part-D plan you will see a list of the prescriptions you purchased during the previous month. The list will include a table listing the name of each prescription along with the retail cost, the amount paid by the insurance company, and the amount paid by you. The statement will also include year-to-date totals for each of these amounts. The numbers you are interested in are the Monthly and Year-To-Date totals for “Retail” cost. When the year-to-date Retail Cost reaches the Initial Coverage Limit you enter the “donut hole” and you must begin paying more of the cost of your prescription drugs.

You can estimate if and when you will enter the donut hole by looking at your monthly retail costs. If this amount is below $200, and your prescription usage remains the same for the remainder of the year, then you will probably not enter the donut hole. If your monthly retail costs are over $200 then divide the Initial Coverage Limit by your monthly total. The result will be the number of the month in which you will enter the donut hole or “gap.”

What to do When You Enter the Donut Hole

Estimates are that approximately 80% of the people who have a Medicare Prescription Plan, do not reach the gap. In other words, 80% of people with Part-D use less than $200 of Prescriptions per month.

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