Once you and your Part D drug plan have spent $2,840 for covered drugs, you will be in the donut hole. Previously, you had to pay the full cost of your prescription drugs while in the donut hole. However, in 2011, you get a 50% discount on covered brand-name prescription medications. The donut hole continues until your total out-of-pocket cost reaches $4,550. This annual out-of-pocket spending amount includes your yearly deductible, copayment, and coinsurance amounts.
Medicare Part D Donut Hole – Prescription Drug Coverage Gap
Most Medicare Part D plans have a coverage gap, sometimes called the Medicare donut hole. This means that after you and your Medicare drug plan have spent a certain amount of money for covered prescription drugs, you then have to pay all costs out-of-pocket for the drugs, up to a certain limit. The yearly deductible, co-insurance, or co-payments, and what you pay while in the coverage gap, all count toward this out-of-pocket limit. The limit doesn’t include the drug plan’s premium.
Closing the Medicare Part D Donut Hole
The Affordable Care Act (ACA) includes important improvements to Medicare prescription drug coverage (Part D) such as reducing expenses for seniors in the donut hole now and eliminating the gap altogether by 2020. Seniors receive additional savings each year on their prescription drugs until the donut hole is closed. The ACA also provides additional assistance for low-income beneficiaries. Since passage of the ACA in 2010, more than 7.9 million people with Medicare have saved over $9.9 billion on prescription drugs.
Medicare Doughnut Hole Definition
A range of total prescription drug spending in the Medicare Part D program where all of the costs must be covered out-of-pocket. As a result of the Medicare doughnut hole, Medicare Part D participants are forced to choose between paying higher insurance premiums, or potentially paying thousands of dollars out-of-pocket to bridge the coverage gap. Many lower-income participants in Medicare are unable to afford either option.
The Obameter: Close the "doughnut hole" in Medicare prescription drug plan
The health care bill signed into law by President Barack Obama is poised to “close the ‘doughnut hole’ in the Medicare Part D Prescription Drug Program that limits benefits for seniors with more than $2,250 but less than $5,100 in annual drug costs.” First, some background on the doughnut hole. In 2010, seniors in the Medicare Part D program must pay the first $310 for prescriptions before coverage kicks in. For subsequent total drug costs between $310 and $2,830, the government will pay 75 percent and beneficiaries pay 25 percent. (The numbers are different from Obama’s promise due to increases since he made the statement.) Then, starting at $2,830, beneficiaries must pay the entire costs until they hit an out-of-pocket limit of $4,550. That’s what’s known as the doughnut hole. After that, “catastrophic coverage” begins, with the government paying 95 percent of costs. The hole won’t be closed immediately, but will instead be phased in over the next 10 years. This year, beneficiaries who reach the doughnut hole will receive a $250 rebate. After that, federal subsidies will enable the patient’s share of the payment to be gradually reduced from 100 percent to 25 percent by 2020. At 25 percent, the doughnut hole range will have the same co-pay rate as the prior range. Separately, brand-name drugmakers will be obligated to provide discounts for prescriptions filled through Medicare Part D starting in 2011. The hole will hang on for a while, but its eventual disappearance is now enshrined in law. Since Obama did not specify a timeline in his promise, we are rating it a Promise Kept.
Medicare Prescription Drug Coverage Guide: Doughnut Hole Coverage Gap
While in the gap, in 2015 you pay 45 percent of the cost of brand-name drugs and 65 percent of generic drugs. (Fifty percent of the discount on brand-name drugs is paid by the companies that manufacture them, and the rest by the federal government. The discount on generic drugs is wholly paid by the federal government.) In subsequent years, these costs will reduce until, by 2020, you pay no more than 25 percent of the cost of any drug in the gap.