Medicare Part D Drug Plans

Donut with a bite taken.
Don’t let the Coverage Gap/donut hole take a bite out of your wallet!

One of the most confusing aspects to Medicare is the Part D Prescription Drug Plan (PDP). The reason for the confusion is that the government designed the benefit and then turned the model over to private insurance companies for implementation, so there are many various plans to choose from.

On average, there are over 20 different drug plans to choose from, all with different premiums, co-pays and formularies (list of covered medicines). So, how are you to know which one is best for you?

Understanding the Medicare Part D Drug Plan

The key to understanding and finding the right drug plan is to know your own list of prescription medicines. You need to look at YOUR medications and how each company tiers them on their formulary. The Medicare website ( has a Plan Finder Tool available to help you evaluate all plans’ costs. You simply enter your drugs, pick your pharmacy and the tool will calculate your copays for all of the plans.

While this sounds pretty straight forward and easy to do, it’s a little more complicated than that. Many companies have preferred pharmacies where you have lower copays. At Imagine Insurance Advisors, we re-train annually with each company so that we understand their plans, formularies and preferred pharmacies. Often times we are able to save clients significant money by suggesting a pharmacy change.

The “Donut Hole” Explained

Formally called the Coverage Gap, the donut hole is not a breakfast special for seniors! The donut hole begins when the total cost of your medicines (what you pay AND what the insurance company pays on your behalf) reaches $4,130 (2021). Once you reach the donut hole, you will pay 25% of the retail cost of your drugs. For example, you take a brand medicine that has a total cost of $300. You are paying a $40 copay, but then reach the donut hole and now pay 25% of the total $300. So instead of paying $40, you will have to pay $75.

You will spend less each year in the donut hole because it is being phased out by the year 2020 due to the Affordable Care Act. For most people, when they get to the donut hole their drug costs go up. The donut hole ends when you reach the Catastrophic Level. This means you have paid $6,550 (2021) out of your pocket for medications. This amount does include what was paid on your behalf by the manufacturer while in the donut hole, so is not necessarily how much of your own money you have spent.

Late Enrollment Penalty

While the government does not require you to have a prescription drug plan, they have instituted a penalty for those who do not sign up for one when they are first eligible or who do not maintain continuous drug coverage. If you do not have credible coverage (Group, VA, individual, state retirement, etc) you will incur a 1%-per-month penalty for each month you go without drug coverage. This penalty stays with you for the rest of your life while you are enrolled in a plan. Currently this is $.35/month (2018). Additionally, the only time you can pick up coverage is during the Annual Enrollment Period (Oct 15-Dec7) unless you have a life event qualifying you for a Special Enrollment Period (SEP.)

Assistance for People with Limited Financial Resources

Low income individuals can apply to Social Security for help with their prescription drugs. You can call Social Security at 1-800-772-1213 or apply online at  At the highest level, you may have no premium, reduced copays and no donut hole.

Trust the Experienced Experts at Imagine Insurance Advisors to Guide You

Imagine Insurance Advisors can help you re-evaluate your drug plan during the Annual Enrollment Period or if you are eligible for a Special Enrollment Period due to a qualifying life event, such as an out-of-state move or nursing home stay. Individuals who receive Extra Help can change their plan at any time during the year.

Plans change every year and we recommend you check your plan every other year. We are here to help. Unlike most insurance agents, we fully understand Part D Drug Plans and the intricacies of them. Contact us today and we can assist you in evaluating your coverage. There is no charge for our review and guidance services.