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 selecting a 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 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 focus on your personal list of prescription medicines and anticipations. The Medicare website ( has a Plan Finder Tool available to help you evaluate every plans’ costs. You simply enter your drugs, choose your pharmacy and the tool calculates your costs for all plans.

While this sounds pretty straight forward and easy to do, there are nuances that make it complicated under the surface. Many companies have preferred pharmacies that you have to use if you want the lowest copays. At Imagine Insurance Advisors, we re-train annually with each company so that we understand their plans, formularies, preferred pharmacies, and restrictions. Often times we are able to save clients significant money by suggesting a simple pharmacy change.

The “Donut Hole” Explained

Formally called the Coverage Gap, the donut hole is not a breakfast special! The donut hole begins when the total cost of your medicines (what you pay AND what the insurance company pays on your behalf) reaches $5,030 (2024.) 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 pay $75.

The donut hole ends when you reach the Catastrophic Level. This level begins when your TrOOP reaches $8,000 (2024.) The TrOOP is comprised of what you’ve paid out-of-pocket on covered prescriptions meds, the amount the insurance company paid on your behalf before the donut hole, and the amount the manufacturer discounted in the donut hole. So it is not $8000 out of your pocket cost, but $8000 all costs together.    Once you reach the Catastrophic Level, your covered prescriptions are $0 for the rest of the calendar year!

Late Enrollment Penalty

While the government does not require you to have drug coverage, 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 (Part D, Part C, Group, VA, state retirement, etc) you will incur a 1% (of the national average drug plan premium)-per-month penalty for each month you go without credible drug coverage. This penalty stays with you for the rest of your life while you are enrolled in a plan. Additionally, the only time you can enroll in drug coverage is during the Annual Enrollment Period (Oct 15-Dec7) unless you have a life event that qualifies 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  Extra Help reduces your premium and copays at the pharmacy counter.

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 (like moving out of the service area.) Individuals who receive Extra Help can change their plan once per calendar quarter during the first three quarters.

Plans change every year and we recommend you check your plan if it’s changed too much or if your medications have changed drastically. We are here to help. 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.