Dear AMAC,

I take several expensive medications and in the past my copays increased throughout the year, especially when I’m in the Donut Hole. I was told the Donut Hole is going away in 2025, and I’m afraid of what that might mean for my drug costs. Please help me understand what is going on.

-Dena

Mount Dora, FL

Hello Dena,

There are major changes taking place in 2025, and one of them is the elimination of the Coverage Gap, commonly referred to as the Donut Hole. Overall, this change aims to lower out-of-pocket drug costs for Medicare beneficiaries, so it should reduce your copays for covered prescriptions. Let’s take a closer look at how the removal of the Donut Hole will affect you.

For some time now, the standard drug benefit has included four coverage phases; to move through each phase, you must spend a certain amount of money on covered drugs.

Current Drug Phases: Deductible à Initial Coverage Limit à Coverage Gap à Catastrophic

How it works today

After meeting your deductible, you and your plan share drug costs until you both spend $5,030 combined, at which point you enter the Coverage Gap (Donut Hole).

During the Coverage Gap, you are responsible for no more than 25% of the cost of covered drugs. Some people have higher drug costs in this phase because they are now paying a percentage of their drug’s cost instead of a flat copay.

Once your expenses reach $8,000 out-of-pocket, you enter Catastrophic coverage, during which you’ll still have some copays for covered drugs for the rest of the year.

With the elimination of the Donut Hole in 2025, your total out-of-pocket costs on covered drugs will be reduced at a faster rate than before. It also pays covered drug costs in full once the Catastrophic phase is met.

2025 Drug Phases: Deductible à Initial Coverage à Catastrophic

How it will work in 2025

After reaching your plan deductible, you will pay the cost-sharing amounts specified under your plan’s Initial Coverage Limit phase.

But you will enter Catastrophic coverage once your out-of-pocket costs reach only $2,000 (even if a portion of payments were made by Extra Help). Plus, you won’t have additional copays on covered drugs for the rest of the year!

Keep in mind that plan premiums and payments for nonformulary drugs will not count towards Catastrophic Coverage limits. That notwithstanding, the new standard drug benefit should alleviate drug costs, especially for those whose drug costs are particularly high.

Thank you for taking the time to write to us Dena! If you have any additional Medicare questions, please be sure to contact us.

Sincerely,

Your Medicare Advisor