Here’s What You Need To Know About The Donut Hole And Medicare Open Enrollment

photo of hand holding a donut

The Medicare Open Enrollment Period (OEP) is a very important time for anyone who has a Medicare Advantage or Part D drug plan. Here are some important points.

  • The OEP begins October 15 and ends December 17. This is your opportunity to review your coverage for next year.
  • Watch for a notice of changes from your plan around October 1.
  • Review the changes and figure out the impact on you.
  • If you are satisfied with the premium, benefits, and costs, don’t do anything and your plan will renew automatically. However, if there are changes that you don’t like or they won’t work for you, review other plans and enroll in one by December 7. The new coverage will begin January 1.

Remember: If you do not take action, you’ll be stuck with whatever coverage you have, come January 1. Pay attention and avoid unpleasant surprises.

The donut hole

Those who take costly medications should know about the donut hole.

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  • Its official name is the Coverage Gap.
  • It is the third payment stage in Medicare Part D drug coverage.
  • In 2016, over 5 million beneficiaries hit the donut hole.
  • By design, the beneficiary is responsible for most or all of the costs in this stage. However, discounts were introduced in 2012.
  • In 2020, the donut hole closed and discounts on all medications now and in the future will be 25%.

Here are the costs associated with each payment stage in 2021.

  • The deductible will be $445, up from $435 this year. Plans can charge any deductible up to that amount. With many plans, the deductible applies to brand-name drugs, usually Tiers 3 and 4. A person who takes these medications will pay the first $445 before the plan starts paying its share.
  • In the second stage, Initial Coverage, plans usually have designated copayments, like $2, $10, and $47. When total drug costs, what the plan and individual have paid, reach $4,130, an increase of $110, the donut hole begins.
  • In the donut hole, all prescribed medications are discounted so the cost is a straight 25%.
  • An individual will exit the donut hole and enter Catastrophic Coverage, the last payment stage, when true (total) out-of-pocket costs (what the individual has paid) hits $6,550. That’s $200 more than in 2020. In this stage, one will pay the greater of 5% or $3.70 for generic medications and $9.20 for brand-name drugs. (In 2020, those amount were $3.60 and $8.95.) There is no maximum amount or cap on how much one will pay.

Donut hole facts of life

  • The donut hole is closed permanently but drugs are not free. An individual pays 25% of the costs for medications.
  • There can be sticker shock when reaching the donut hole. An example from 65 Incorporated case files: Joseph takes three medications, two insulins and one blood thinner, all with copays of $47. The full cost of those three drugs is $10,070 so once he hit the donut hole, his costs skyrocketed to over $2,500 a month.
  • Generally, taking three or four brand-name drugs will land you in the donut hole. In some cases, one or two drugs advertised on television could do it. For example, the recommended dose of one biologic to treat ankylosing spondylitis has a full cost of about $5,500 in the Milwaukee area. A person taking that medication will likely pass through the first three stages, including the donut hole, in the first month or two of coverage.
  • In 2016, more than 5 million Part D plan members reached the donut hole.
  • Those who reach the donut hole will likely do so again year after year. That’s because they are taking medications to treat a chronic condition, one that cannot be cured.

If you take expensive medications, circle October 15 on your calendar. Switch then or live with your plan in 2021.