The "Donut Hole" and how your drug deductible works with medicare

November 9, 2019

Let's take a quick look at how drug payments work with a Part D Prescription Drug plan.  There are 4 common elements of a medicare drug plan that we should cover.


First, you may have a deductible.  You are responsible for all of your drug costs until you reach your deductible.  Many drug plans do not have a deductible so you skip to the 2nd stage of your coverage: The Initial coverage period.  

During this initial coverage period, you’ll pay a co-pay or a co-insurance and the plan pays the rest.  During this initial coverage period your portion of the cost is minimal. You stay in this stage until your total drug costs have reached $4020 in 2020.  After you reach that amount, you enter the Coverage Gap also called the “Donut Hole”


When you’re in the coverage gap, you’ll pay up to 25% of the costs of brand-name prescription drugs and up to 25% of the price of generic drugs. This is more than when you were in the initial coverage period. After your out-of-pocket costs reach the limit for catastrophic coverage ($6,350 in 2020), you have reached your final plan stage: catastrophic coverage.


With catastrophic medicare prescription coverage, you pay just a small co-payment or co-insurance amount for all your covered prescriptions for the rest of the year.

What is most important to remember is that your prescription drugs will cost different amounts throughout the year.  Being in the Donut Hole and paying extra for your prescriptions can be frustrating.  The federal government is gradually shrinking the coverage gap for Medicare Part D Plans.


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Keaton Marks License #0L47187

760-484-0979    -    San Diego

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