Medicare Part D Coverage Gap
The Medicare Part D coverage gap, also known as the Medicare Donut Hole, was enacted as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) and went into effect on January 1, 2006 for individuals aged 65 or older. The Donut Hole, or coverage gap, is one of the most controversial parts of the Medicare Part D prescription drug benefit and of concern to many people who have joined a Part D drug plan. Although all prescription drug plans must explain the Donut Hole in their literature and advertising, it still comes as a shock to many enrollees when they go abruptly from making co-payments for their drugs to paying 100% of the cost.
The Donut Hole is the difference of the initial coverage limit of $310 and the catastrophic coverage threshold of $6,440, as described in the Medicare Part D prescription drug program of the United States. After a Medicare beneficiary surpasses the prescription drug coverage limit of $2,830 the Medicare beneficiary is financially responsible for the entire cost of prescription drugs until the expense reaches the catastrophic coverage threshold.
Comparison of 2006 through 2010.
| Medicare Part D Benefit Parameters for Defined Standard Benefit 2006 through 2010 Comparison |
|||||
|---|---|---|---|---|---|
| Part D Standard Benefit Design Parameters: | 2006 | 2007 | 2008 | 2009 | 2010 |
| Deductible - (after the Deductible is met, Beneficiary pays 25% of covered costs up to total prescription costs meeting the Initial Coverage Limit. | $250 | $265 | $275 | $295 | $310 |
| Initial Coverage Limit - Coverage Gap (Donut Hole) begins at this point. (The Beneficiary pays 100% of their prescription costs up to the Out-of-Pocket Threshold) | $2,250 | $2,400 | $2,510 | $2,700 | $2,830 |
| Total Covered Part D Drug Out-of-Pocket Spending including the Coverage Gap - Catastrophic Coverage starts after this point. | $5,100.00 | $5,451.25 | $5,726.25 | $6,153.75 | $6,440.00 |
| Out-of-Pocket Threshold - This is the Total Out-of-Pocket Costs including the Donut Hole. 2010 Example: $310 (Deductible) +(($2830-$310)*25%) (Initial Coverage) +(($6440-$2830)*100%) (Cov. Gap) = $4,500 (Maximum Out-Of-Pocket Cost prior to Catastrophic Coverage - excluding plan premium) |
$3,600 $ 250.00 $ 500.00 $2850.00 $3600.00 |
$3,850 $ 265.00 $ 533.75 $3051.25 $3850.00 |
$4,050 $ 275.00 $ 558.75 $3216.25 $4050.00 |
$4,350 $ 295.00 $ 601.25 $3453.75 $4350.00 |
$4,550 $ 310.00 $ 630.00 $3610.00 $4550.00 |
What happens after I leave the Donut Hole?
After the Donut Hole, the Medicare Part D beneficiary enters into the last phase of the Medicare Part D program which is also called the Catastrophic Coverage. From this point on, the Medicare Part D beneficiary pays $2.50 per month for generics or $6.30 per month for name brand medications or 5% of the medication's retail cost, whichever cost is higher.