Most Medicare Prescription Drug Plans have a coverage gap (also called the “medicare donut hole”). This means there’s a temporary limit on what the drug plan will cover for drugs.
Not everyone will enter the coverage gap. The coverage gap begins after you and your drug plan have spent a certain amount for covered drugs. In 2015, once you and your plan have spent $2,960 on covered drugs (the combined amount plus your deductible), you’re in the coverage gap. In 2016, once you and your plan have spent $3,310 on covered drugs, you’re in the coverage gap. This amount may change each year. Also, people with Medicare who get Extra Help paying Part D costs won’t enter the coverage gap.
Once you reach the coverage gap in 2015, you’ll pay 45% of the plan’s cost for covered brand-name prescription drugs. You get these savings if you buy your prescriptions at a pharmacy or order them through the mail. The discount will come off of the price that your plans has set with the pharmacy for that specific drug.
Although you’ll only pay 45% of the price for the brand-name drug in 2015, 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. What the drug plan pays toward the drug cost (5% of the price) and what the drug plan pays toward the dispensing fee (55% of the fee) aren’t counted toward your out-of-pocket spending.
In 2015, Medicare will pay 35% of the price for generic drugs during the coverage gap. You’ll pay the remaining 65% of the price. What you pay for generic drugs during the coverage gap will decrease each year until it reaches 25% in 2020. The coverage for generic drugs works differently from the discount for brand-name drugs. For generic drugs, only the amount you pay will count toward getting you out of the coverage gap.