95% of your brand-name drug's retail cost is counted toward exiting the Donut Hole.
If your monthly purchases of formulary medications consistently have a retail value of
over $420,
you will exceed your Medicare Part D prescription drug plan's Initial Coverage Limit (
$5,030 in 2024)
and enter the Donut Hole portion of your Medicare plan.
Once you reach the Donut Hole or Coverage Gap, you will receive a
discount on the retail prices of your brand-name and generic drug
purchases.
So in 2024, once you reach the Donut Hole, your brand-name drug purchases will receive a 75% Donut Hole discount
(you will pay 25% of retail) and 95% of the brand-name drug price will count toward meeting your true
out-of-pocket threshold (
TrOOP)
or Donut Hole exit point of
$8,000.
In general, with the brand-name Donut Hole discount, you will receive credit for the 70% brand-name drug
manufacturer discount
plus the portion of the prescription drug’s retail
price you paid (25%) - but, you do not get credit toward TrOOP for the portion of the drug cost paid by your Medicare plan (5% in 2024).
So if you buy a brand-name medication with a $100 retail cost
while in the 2024 Donut Hole, you pay $25 and get $95 credit toward
exiting the Donut Hole or meeting the $7,400 out-of-pocket threshold.
Again, the additional 5% of the “discount” is paid by your Medicare Part D
plan and therefore does NOT count toward exiting the Donut Hole or
reaching your out-of-pocket costs (
TrOOP).
In 2024, generic drug purchases also receive a 75% Donut Hole discount (you pay 25% of retail) and
only your discounted generic drug cost (the 25% you paid) counts toward meeting your 2024 true
out-of-pocket threshold (
TrOOP
or total drug spend) of
$8,000.
The 75% Donut Hole discount is paid by your Medicare Part D plan, so you do not get TrOOP credit for this amount.
So if you purchase a generic medication with a retail value of $100
while in the 2024 Donut Hole, you will receive a 75% discount and pay
$25. The $25 will then count toward meeting your 2024 TrOOP threshold
of $8,000.
Keep in mind that brand-name drug purchases get the same 75% discount as generic drugs, but
more of the drug's retail cost counts toward meeting your TrOOP -
so it is possible that a brand-name medication may be more cost effective (get you through the donut hole faster) than a generic alternative -
assuming that your Medicare Part D plan covers both the brand-name and the generic equivalent and both medications have similar retail pricing.
Please note, if the retail value of
your monthly formulary medication purchases is consistently over $934, you will most likely
exceed your Medicare Part D prescription drug plan's
total out-of-pocket spending limit (TrOOP) (
$8,000 in 2024)
and enter the Catastrophic Coverage portion of your 2024 Medicare plan,
where you will pay nothing ($0) for your formulary drug purchases for the remainder
of the year.
Keep in mind that 2023 was the last year that Medicare Part D
beneficiaries paid cost-sharing in the Catastrophic Coverage phase.
For plan year
2024,
the
Inflation Reduction Act (IRA) eliminated beneficiary cost-sharing in the Catastrophic Coverage phase.
You can read more about the
Donut Hole Discount in our FAQs or in our
Q1Medicare.com articles.