Medicare Part D Donut Hole – Medicare Coverage Gap
What is the Medicare Donut Hole?
Most Medicare Part D plans have a coverage gap, sometimes called the Medicare Donut Hole. This means that after the person and the person's drug plan have spent a certain amount of money for covered drugs, the person then has to pay all costs out-of-pocket for the drugs, up to a limit. The yearly deductible, co-insurance or co-payments, and what the person pays while in the coverage gap all count toward this out-of-pocket limit. The limit doesn't include the drug plan's premium.
There are plans that offer some coverage while a person is in the gap, like for generic drugs. However, plans with gap coverage may charge a higher monthly premium. Check with the plan first to see if the person's drugs would be covered during the gap.
Once a person reaches the plan's out-of-pocket limit during the coverage gap, "catastrophic coverage" automatically kicks in. Catastrophic coverage assures that once a person has spent up to the plan's out-of-pocket limit for covered drugs, he or she will only pay a small co-insurance amount or a co-payment for the rest of the year.
The Donut Hole for 2010 and Beyond
The example below shows the costs for covered drugs in 2010 for a plan that has a coverage gap. Ms. Smith joins the ABC Prescription Drug Plan. Her coverage begins on January 1, 2010. She doesn't get Extra Help and uses her Medicare drug plan membership card when she buys prescriptions.
| Monthly Premium - Ms. Smith pays a monthly premium throughout the year. | |||
|---|---|---|---|
| Source: Information from the official government handbook published by the Centers for Medicare and Medicaid Services: Medicare & You 2010 and 2011 | |||
1. Yearly Deductible  |
2. Copayment or Coinsurance |
3. Coverage Gap |
4. Catastrophic Coverage |
| Ms. Smith pays the first $310 of her drug costs before her plan starts to pay its share. | Ms. Smith pays a copayment, and her plan pays its share for each covered drug until what they pay (plus the deductible) reaches $2,830. | Once Ms. Smith and her plan have spent $2,830 for covered drugs, she is in the coverage gap. She will have to pay all of her drug costs until she has spent $4,550. | Once Ms. Smith has spent $4,550 out-of-pocket for the year, her coverage gap ends. Now she only pays a small copayment for each drug until the end of the year. |
It's important to note that people who get "extra help" paying drug costs won't have a coverage gap and will pay a small or no co-payment once they reach catastrophic coverage. "Extra Help" is a special part of Medicare drug coverage that gives much more assistance to people with limited incomes than the regular program does. If you qualify, you can save a lot of money. If you qualify for "full" Extra Help, you receive coverage throughout the year (no doughnut hole) and pay very little for your prescriptions. If you qualify for "partial" Extra Help, you receive coverage throughout the year and pay a reduced premium and deductible and up to 15 percent of the cost of your drugs.
The recent federal Health Care Reform legislation will reduce the doughnut hole gap over several years to make prescription drugs even more affordable. If you reach the coverage gap in 2010, you may qualify to get a one-time $250 rebate check. If you reach the coverage gap in 2011, you may get a 50% discount on brand-name prescription drugs when you buy them. There will be additional savings in the coverage gap each year through 2020, when the donut hole is closed completely.
