Medicare Part D: The Donut Hole and How Drug Plans Work

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Now lets talk about the most popular pastry in Medicare the donut. Stay Tuned…

A donut is used to represent how most drug plans work on part D of medicare… Now every plan is different but you can expect most drug plans to work like this… So as you can see you may need to pay a $400 yearly deductible before your plan pays anything. After that you will need to pay a copay and coinsurance for your drugs. I have used 25% coinsurance in this example but this is different from plan to plan and from drug to drug. But to keep it simple in this example you pay 25% of the drugs cost and the prescription drug company pays 75% until you and the insurance company together have paid a total of $3,700. This is when you reach the donut hole or the coverage gap. In this gap you will be responsible for paying 40% for brand name drugs and 51% of generic drugs. Now when you and the insurance company have paid a total of $4950 you move into catastrophic coverage. This is when the government steps in and helps out the insurance company. You are then only responsible for 5% of drugs cost from this point until the end of the year.

Check Plan Every Year:

Now part D plans are run by medicare-approved private insurance companies and you pay a premium to lower the cost your prescription drug coverage. Every plan has a list of covered drugs or a Formulary. So, They put drugs into different tiers and have different cost for each tier. Now these companies can change their formularies each and every year so it is important to alway check to see if you are on the lowest cost plan for the drugs you are currently taking. Make sure to check out my other video about how to go online and look up the best plan for you soon as this video ends. And as always please like, comment, and subscribe to my channel so I can help more people.

Andrew Walsh
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Title: Medicare Part D: The Donut Hole and How Drug Plans Work

Medicare Part D: The Donut Hole and How Drug Plans Work


2 thoughts on “Medicare Part D: The Donut Hole and How Drug Plans Work

  1. I thought when you are in the hole the only thing that counts towards getting out of the hole is what you pay. They don’t look at what your insurance carrier is paying to help get you out of the hole. Wright or wrong???

    • Yes Mike you are correct, thanks for pointing that out. I miss spoke and will make a correction in the video. With brand name drugs 95% of the price, what you pay plus the 50% manufacturer discount payment, will count as out-of-pocket costs which will help you get out of the coverage gap. And for generic drugs, only the amount you pay will count toward getting you out of the coverage gap. So 51% of the generic drug cost will go towards your out-of-pocket costs. Thank you.


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