Medicare Part D Donut Hole
What is the Medicare Donut Hole?
The initial coverage period for a standard benefit model 2013 Medicare prescription drug plan ends after the plan pays $2,970 in medication costs for you. The coverage period that begins after the conclusion of the initial coverage period is known as the Medicare Donut Hole. From 2011 to 2020, a combination of government subsidies and manufacturer discounts will progressively reduce out-of-pocket costs for covered drugs during the donut hole period. In 2013, covered generic drugs receive a 21% government subsidy, so members pay 86% of the costs of generic drugs during the donut hole. For covered brand-name drugs, the Medicare Coverage Gap Discount Program provides a 52.5% discount from manufacturers that have agreed to participate. There are also some Medicare Prescription Drug plans that offer coverage to further reduce out-of-pocket costs in the donut hole. This coverage is in addition to the subsidy and discount during the donut hole described above.
Individuals in the donut hole will enter catastrophic coverage after their out-of-pocket expenses for drugs on the plan's formulary reach $4,750. The money you spend on drugs that are not covered on your plan's formulary does not count towards the catastrophic coverage threshold. Medicare Part D coverage resets each year. On January 1st of each year, you begin with your plan's initial drug coverage and its associated deductible requirements (if there is a deductible). If you were in the donut hole in December of the prior year you would return to the plan's initial coverage on January 1st where you pay a co-payment for drugs after the plan's deductible is satisfied (assuming the plan has a deductible).
How to Avoid the Donut Hole
The are some plans that offer additional coverage within the donut hole that extends beyond the aforementioned government subsidies for generic drugs and manufacturer discounts for brand-name drugs. Our Part D comparison tool can show what plans, if any, offer that benefit in your area.
Health Reform and the Donut Hole
Starting in 2011, the donut hole will be phased out over time. The elimination of the donut hole will not make drugs free. Drugs belonging to the plan's formulary will require enrollees to pay 25% of the costs. Off formulary drugs will still be paid for 100% by the enrollee. However, people who hit the donut hole will receive a 52.5% discount on covered brand-name drugs and will receive a 21% government subsidy on generic drugs covered by the plan in 2013. Below are two tables that illustrate the projected changes in 'donut hole' costs for brand-name and generic drugs from 2011 through 2020
Brand-Name Drug Costs in the Donut Hole
|Calendar Year||Discount from Drug Manufacturer||Government Subsidy||Consumer's % Payment of Brand-Name Drug Cost|
Generic Drug Costs in the Donut Hole
|Calendar Year||Government Subsidy||Consumer's % Payment of Generic Drug Cost|
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Medicare Advantage Plans, sometimes called "Part C" or "MA Plans," are offered by private companies approved by Medicare and provide Medicare Part A and Part B coverage. Medicare prescription drug coverage is insurance run by an insurance company or other private company approved by Medicare. A Medicare Supplement plan is a health insurance plan provided by a private company that fills in the "gaps" in original Medicare coverage.