Home Medicare Part D The Medicare Coverage Gap: What You Need to Know

The Medicare Coverage Gap: What You Need to Know

With Medicare Part D, you’ll reach a coverage gap (also known as the donut hole) once you and your plan have spent a particular amount on medications for the year. In 2023, you reach the coverage gap after you and your plan have spent $4,660. That jumpstarts a temporary shift in coverage.

The Coverage Gap Doesn’t Just Impact You

The coverage gap also affects the manufacturer and your plan. When you’re in the coverage gap, you, your plan, and the manufacturer (if you’re purchasing a brand name medication) will each pay a fixed percentage of a particular drug price.

You Can Get Out Of The Coverage Gap

You can exit the coverage gap in the same way you entered – by spending a certain amount out-of-pocket for the year. In 2023, your coverage gap ends once you’ve spent $7,400 out-of-pocket.

Once you’ve exited the coverage gap, you enter catastrophic coverage. Catastrophic coverage ensures that you only pay a small percentage of your medication costs, rather than up to 25%, as you paid during the coverage gap.

Only Certain Expenses Count Toward The Coverage Gap

Only certain types of expenses count toward out-of-pocket spending. This includes:

  • Deductibles
  • What the manufacturer pays (when purchasing brand-name medications)
  • Coinsurance
  • Copay

Your monthly premiums, the amount spent on medications that aren’t covered, and dispensing fees do not count toward your out-of-pocket spending.

Coverage For Brand Name Medications Works Differently Than Coverage For Generic Medications

The involvement of the manufacturer when you purchase brand-name medications makes a difference in your out-of-pocket spending and will enable you to get out of the coverage gap without having to rely solely on what comes out of your own pocket.

Here’s an example of how the coverage gap works with brand-name medications and what counts as out-of-pocket spending:

  • Your medication is $100 and has a $2 dispensing fee. 
  • The manufacturer covers 70% of the drug cost ($70), and you pay 25% of the $102 total ($25.50)
  • The cost that you and the manufacturer paid ($95.50) counts toward the out-of-pocket spending

Medicare covers 75% when purchasing generic medications, and you’ll pay 25%. In the instance of a $10 generic medication with a $2 dispensing fee, the amount that counts toward your out-of-pocket spending will be $3.

Your Plan May Give You An Extra Discount

Some Medicare drug plans feature coverage in the coverage gap. If your plan has this, you can get an additional discount after your plan’s coverage has been applied.

Keep Your Savings High And Out-Of-Pocket Costs Low

At KBI Solutions, we’re here to help you preserve what you’ve worked hard for and give you a Medicare policy to cover your medications to make them as affordable as possible. We offer a sea of plans to choose from, and with one phone call, we will find the one that is the perfect one for you. Call us today at (254) 918-5444 to learn more.