The Donut Hole is closing due to the ACA

The Affordable Care Act (ACA) is closing the Medicare Part D coverage gap in 2020. This gap, also known as the “Donut Hole", occurs once you and your drug plan have spent a certain amount of money for drugs. The coverage gap forces you to pay a much higher percentage of drug costs until you reach the other end of the gap. See below for more on how this will function as of 2020 and beyond and affect Medicare Part D prescription drug plans in general.

How does the discount work?

Brand-Name drugs

  1. The drug company signs an agreement with Medicare to participate in the Medicare Coverage Gap Discount Program.
  2. In 2016, you pay 45% of the plan’s cost for the brand name drug when you are in the Coverage Gap
  3. The entire price, including the discount the drug company pays, goes towards the amount you need to pay to get out of the Coverage Gap.

Generic drugs

  1. The drug company signs an agreement with Medicare to participate in the Medicare Coverage Gap Discount Program.
  2. In 2016, you pay 58% of the plan’s cost for the generic drug when you are in the Coverage Gap.
  3. Only the amount you pay counts towards the amount you need to pay to get out of the Coverage Gap.

The 45% for brand-name drugs and 58% for generic drugs are both decreasing from now until 2020 to 25% as the Donut Hole is closing. That percentage is what you pay right now before the Coverage Gap, thus why we are able to say there will be no more gap or change once you hit a certain amount.

How to Avoid the Part D Penalty

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