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How is the donut hole in Medicare drug coverage going to close?

The Affordable Care Act attempts to address prescription drug costs for seniors by having Medicare Part D pay more of the cost of prescription drugs by providing discounts on name-brand prescription drugs and closing the gap in prescription drug coverage (the “doughnut hole”) by 2020. The doughnut hole is the gap in coverage that occurs after your plan stops paying for your drugs and before you reach the benchmark required for catastrophic coverage ($4,550 in 2011). While you are in the doughnut hole you are responsible for paying 100 percent of the cost of your medication. 

The Affordable Care Act created a Medicare Coverage Gap Discount Program to help people pay for their medication while they are in the doughnut hole. To qualify for the Medicare Coverage Gap Discount Program you must

  • be enrolled in the Medicare Prescription Drug Plan or a Medicare Advantage plan that includes prescription drug coverage
  • NOT receive Extra Help, a Medicare and Social Security program that helps Medicare beneficiaries with limited incomes and resources pay for their prescription drugs
  • have reached the gap in coverage (“doughnut hole”) that qualifies you for the discount

If you qualified in 2010, you may have already received a one-time, tax-free rebate of $250 from Medicare when you entered the doughnut hole. And in 2011, the Act provides for a 50 percent discount on brand-name prescription drugs and 7 percent discount on generics for relief of your out-of-pocket expenses while you are in the doughnut hole. 

The percentage discount you receive will continue to increase each year until 2020, when you will be responsible for paying 25 percent for covered brand-name and generic drugs while you are in the doughnut hole and until you reach the out-of-pocket spending limit ($4,550 in 2011). Check your Explanation of Benefits (EOB) statement on a regular basis to see how much you have spent on covered prescription drugs and to help you determine when you entered the doughnut hole and can expect to receive discounts on your covered medications. 

Be aware that prescription drug coverage under Medicare can be affected by other factors, such as other insurance coverage or assistance, including but not limited to state aid or other discount drug programs, and whether the company that makes your drug has agreed to participate in the Act’s discount drug program.
Dr. Michael Roizen, MD
Internal Medicine

The donut hole in Medicare drug coverage will soon close with discounts on covered drugs and a rebate check. Thanks to the Affordable Care Act, you can receive a 50% discount on covered brand-name drugs and a 7% discount on covered generic drugs while you are in a coverage gap. There will be additional savings for people in the coverage gap each year until the hole is completely closed by 2020.

For questions about your donut hole rebate check, contact your prescription drug plan, or Medicare at 1-800-633-4227 or www.medicare.gov.

The gap will gradually narrow until it disappears in 2020. If you reach the doughnut hole next year, you’ll get a 50 percent discount on brand-name prescription drugs and a 7 percent discount on generic prescription drugs while you are in the coverage gap. 
 
This means you will not have to pay 100 percent of the cost of all your drugs while you are in the coverage gap. Depending on the drugs you take, you will be paying only half of what you are paying in 2010.
 
Even after the gap is gone, however, everyone on Part D will still have the same level of cost sharing — about 25 percent — from the time you meet your deductible until the time you reach catastrophic coverage.
Catastrophic coverage remains in place even after the coverage gap goes away. Catastrophic coverage starts in 2010 when your total drug costs have climbed to $4,550. After that point, you have only a 5 percent co-pay.

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Important: This content reflects information from various individuals and organizations and may offer alternative or opposing points of view. It should not be used for medical advice, diagnosis or treatment. As always, you should consult with your healthcare provider about your specific health needs.