Paying Less for Drugs in the Part D 'Doughnut Hole'

New money-saving changes are in place

by: Patricia Barry, from: AARP Bulletin, January 13, 2011

En español | Q. I hear the new health care law gives us a better deal in the Part D doughnut hole this year. How will this work?

As a result of the new health care law, drug costs are now discounted in the 'doughnut hole' coverage gap. — Photo by Owaki/Kulla/Corbis

Yes, 2011 begins the process of shrinking the gap in coverage — usually known as the doughnut hole — that has always been the biggest drawback for people enrolled in the Medicare Part D prescription drug program.

You fall into the gap if the total cost of your drugs since the beginning of the year reaches a certain level: $2,840 in 2011. (The "total cost" in this initial coverage period includes the amount you've spent yourself — your deductible, if your Part D plan has one, and copayments — and the amount your plan has contributed.)

At that point, in previous years, you would have had to pay 100 percent of the cost of your drugs in the gap, unless you had other coverage. And only when you had spent a large amount out of pocket since the beginning of the year ($4,550 in 2010) could you get out of the gap and qualify for low-cost catastrophic coverage until the end of the year.

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But this year, under a provision of the new health care law, you'll spend much less of your own money in the doughnut hole:

You'll receive a 50 percent discount on brand-name and biologic drugs, including insulin and vaccines, contributed by their manufacturers.

You'll receive a 7 percent discount on generic drugs and Part D-covered supplies used to administer insulin, through a subsidy from the federal government.

Over the next 10 years these discounts will get larger, so that by 2020 you will pay no more than 25 percent of the cost of any Part D-covered drugs in the doughnut hole.

Who gets the discounts?

Anybody who gets Part D drug coverage and falls into the doughnut hole is entitled to the discounts, including those who are enrolled in:

A "stand-alone" Part D drug plan — the type mostly used by people in the traditional Medicare program.

A Medicare Advantage health plan that provides drug coverage.

A Part D drug plan or a Medicare Advantage plan that is sponsored by a current or former employer or union.

Will people who get Extra Help get the discounts?

No. People with limited incomes who receive low-cost prescription drug coverage under the government-subsidized Extra Help program already have year-round coverage without a doughnut hole.

How do I get the discounts?

You don't need to apply for them or fill out any paperwork. The discounts will be automatically applied at the pharmacy or, if you get your prescriptions through mail order, by your plan's mail-order service.

Next: Does the discount apply to all Part D drugs? >>