Summary: The Medicare donut hole or coverage gap is a feature of Medicare Part D prescription drug plans. Changes are coming to the donut hole in 2020. Those changes could mean savings for some beneficiaries.

If you have a Medicare prescription drug plan, you need to know about changes that are coming in 2020.

The coverage gap (Medicare donut hole) is going to look a bit different in the new year. Beneficiaries may find they will be saving money between what they pay in 2019 and what they will pay in 2020. Learn what you can expect from the Medicare Part D donut hole 2020 so you can plan your budget.

How does Medicare Prescription Drug Coverage Work?

Original Medicare includes Part A (hospital coverage) and Part B (medical coverage). Medicare prescription drug coverage is not a part of Original Medicare. Beneficiaries can enroll in a prescription drug plan to get this coverage. You can choose a stand-alone prescription drug plan or a Medicare Advantage plan that includes prescription drug coverage.

Private insurance carriers approved by Medicare offer prescription drug plans. Plans can vary in both cost and the medications covered. It’s a good idea to compare different plans to find the right one for you.

Prescription drug plans feature formularies, which are lists of covered medications. Some formularies have tiers in which some medicines are more expensive than others. For example, medications in one tier might have a $25 copayment, while another tier might have a $40 copayment. 

What is the Coverage Gap (Medicare Donut Hole)?

The Medicare coverage gap is also known as the donut hole. Once you have paid a set amount for your medications, you enter the coverage gap.

If you buy a brand-name medication, the amount you pay will apply to the coverage gap. The manufacturer discount will also be added. While you don’t pay this amount, it will be applied to your out-of-pocket total to help you get out of the coverage gap quicker.

If you purchase a generic medication, only the amount you pay will apply to the coverage gap in 2020. The amount covered by Medicare is not added to your out-of-pocket total.

Part D Coverage Gap 2020 (Medicare Donut Hole): What to Expect

The Medicare Part D donut hole 2020 will look a bit different than it does in 2019. The threshold to get into the coverage gap will increase to $4,020 from $3,820 in 2019. Once you are in the gap, you will pay 25% for both brand-name and generic prescription medications in 2020. Medicare will cover 75% of the cost of generic medications.

The 70% manufacturer discount for brand-name medications will still apply to your out-of-pocket total in 2020. You will only be able to add the amount you pay for generic medications, even though you will be paying a lower amount. The amount Medicare covers cannot be added to your out-of-pocket total.

After the Medicare Donut Hole: Catastrophic Coverage

Once you reach your out-of-pocket limit for the year, you are out of the coverage gap. In 2019, that amount is $5,100. In 2020, the out-of-pocket limit will increase to $6,350. If you reach that threshold, you enter the catastrophic coverage phase of your prescription drug plan. During this phase, you will only pay a small copayment or coinsurance amount for medications for the rest of the year. 

Is It Time to Switch Prescription Drug Plans?

You can make changes to your prescription drug plan during the Fall Open Enrollment Period. This period runs from October 15 through December 7 every year. During this window, you can enroll in a stand-alone prescription drug plan or switch from one plan to another.

To compare prescription drug plans in your area, click the Get Quotes button to schedule a phone call or to request a personalized email.