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Medicare Donut Hole - Medicare Part D Drug Plan Coverage Gap

Understanding the Medicare Part D Donut Hole
Below is a summary of the details on how the Medicare Part D Donut Hole works. Medicare intends on eliminating the Part D Donut Hole completely by 2020, and instead of making you pay for 100% of your medications during this gap; you will only be responsible for 25% of the cost. Every year until then, the coverage gap will be reduced, getting smaller and smaller.

*You will pay a monthly fee for your drug plan, this fee is independent from the details outlined below. The summary of costs below includes everything except your monthly drug plan fee. Your monthly drug plan premium does not count toward your out-of-pocket limit for the year.

  • If you join a Medicare prescription drug plan, you may have to pay up to the first $310 of your drug costs. This amount is your deductible. Some plans have no deductible, or a smaller deductible.
  • During the initial coverage period, you may pay co-payments and co-insurance, and your Medicare Part D drug plan will pay its portion for each covered drug until your combined amount (you & the insurance company) reaches $2,840 (including the deductible).
  • Once you and your Medicare Part D drug plan combined have spent a total of $2,930 on covered drugs, you will be in what’s called the “donut hole”. Previously, you had to pay the full cost of your prescription medications while in the donut hole. However, in 2012, you get a 50% discount on covered brand-name prescription medications, and a 7% discount on generics. You will continue to be in the donut hole until your total out-of-pocket cost reaches $4,700 (in 2012). This annual out-of-pocket spending amount includes your annual deductible, copayment, and coinsurance amounts.
  • When you have spent $4,700 in out-of-pocket expenses, you will enter what’s known as “catastrophic coverage”, in which your coverage gap will end and your drug plan will pay for most of your medications. You may still be responsible to pay small co-payments.

Medicare Part D Donut Hole Picture Diagram

Medicare Donut Hole

Healthcare Reform and Medicare Part D Changes
The Affordable Care Act makes several changes to Medicare Part D to reduce your total out-of-pocket expenses when you reach the donut hole. Some of these changes are:

  • Beginning in 2012, if you reach the donut hole, you will be given a 50% discount on covered brand name medications, and a 7% discount on generic medications.
  • Medicare will begin reducing the coverage gap year-after-year until it is eventually eliminated completely in 2020.

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