Part 3: Moving In and Out of the Doughnut Hole

En español | In any one year, the Part D drug benefit gives you initial coverage up to a certain level. But then in most cases there’s a gap in benefits before coverage kicks in again. 

See also: Have a question? Ask Ms. Medicare

This gap, known universally as the “doughnut hole,” is the most criticized and unpopular part of the Medicare prescription drug program.

However, the health care reform law of 2010 will gradually close the coverage gap. From 2006, when Part D began, through 2010, falling into the gap meant having to pay 100 percent of your costs while in it. But in 2011 and future years, you will pay much less. It works like this:

• Once your total drug costs (what your plan has paid plus your deductible and copays) exceed a certain amount ($2,840 in 2011) from the beginning of the calendar year, you are then in the gap.
  
  
• While in the gap, in 2011 you pay 50 percent of the cost of brand-name drugs and 93 percent of the cost of generic drugs. (The 50 percent discount on brand-name drugs is paid by the companies that manufacture them.  The 7 percent discount on generic drugs is 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.
  
  
• You get out of the gap when your out-of-pocket costs during the earlier part of the year (deductible and copays) plus anything you paid for drugs in the gap reach a certain dollar limit ($4,550 in 2011). The manufacturers’ contribution for brand-name drugs also counts toward this limit, even though you didn’t pay for it. But the government’s contribution for generic drugs does not count toward the limit.
  

• If you reach this limit, catastrophic drug coverage kicks in automatically and your plan will pay 95 percent of your remaining costs until the end of the year.
  
  
• This cycle—deductible, initial coverage period, coverage gap and catastrophic coverage—is repeated each calendar year.
  

Will everyone fall into the drug coverage gap?

No. You’ll avoid it if:

• Your drugs over the year cost no more than $2,840 (in 2011).
  
  
• You qualify for Extra Help, which has no gap.
  
  
• You have extra coverage from employer or union benefits that covers all or part of the gap.
  
  
• You have extra coverage from a state pharmacy assistance program that provides coverage in the gap.
  
  
• You are enrolled in a Medicare drug plan that covers your drugs (usually generics only) during the gap, often for a higher premium.

Next: How to purchase drugs during the coverage gap. >>