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The coverage gap is a phase of Medicare Part D plans where the plan member must pay a percentage of the total cost of their medications.
Almost all Part D plans have a coverage gap (sometimes called the “donut hole”). However, not everyone will reach the coverage gap. Whether or not you get into the coverage gap will depend on your medications. People who take many brand-name medications or have one expensive medicine are more likely to reach the coverage gap.
Getting in the Coverage Gap
The coverage gap begins when the total drug cost for the year reaches a specific amount. Medicare updates the Part D threshold annually. For example, in 2022, members will be in the coverage gap when their total drug costs reach $4,430.
The total drug cost includes the amount the insurance company paid for the medication and the member’s copay. So, for example, if the member’s copay was $25 and the insurance company paid $175 for the drug, the amount that would count toward the coverage gap would be $200.
Once the member has reached the coverage gap, they will be responsible for paying no more than 25% of the total cost for each brand-name and generic medication. So using the example above, they would pay $50 for this medication while in the coverage gap.
The member will remain in the coverage gap phase unless they spend up to the catastrophic coverage threshold. In 2022, catastrophic coverage begins when the member has paid $7,050 in total drug costs.
To learn more about the stages of Part D, click here.
Not all Part D costs count toward reaching the coverage gap. For example, the member’s Part D premium does not count toward the total drug costs. Also, the pharmacy’s dispensing fee (when applicable) and medications not covered by your plan (including over-the-counter medicines) do not count toward reaching the coverage gap.
Your agent should be able to provide you with a medication breakdown of your plan and the estimated drug costs each year.
To learn how to save money with Part D, read our article by clicking here.
Christina Valenzuela
Christina is the co-owner of Vista Mutual Insurance Services, an insurance agency that focuses exclusively on the needs of Medicare beneficiaries. She has worked in the Medicare insurance industry since 2006 and is a licensed insurance producer in multiple states.
Although we strive to be as accurate as possible, any differences between this document and the information on Medicare.gov will be governed by the information on Medicare.gov.
