How the Donut Hole Works in 2010

The "donut hole" refers to a costly gap in the Medicare Part D prescription drug coverage plan. The plan currently covers up to $2,830 per year in prescription drug payments, then stops. Coverage does not begin again until the recipient’s drug costs exceed $6,440 annually, thus leaving the recipient responsible for paying all drug costs between $2,830 and $6,440.

This is the standard Part D drug prescription plan for 2010 required by Medicare.

  • If you join a Medicare prescription drug plan, you may have to pay up to the first $310 of your drug costs. This is known as the deductible.
  • During the initial coverage phase, your drug plan pays 75% of the covered prescription drug costs after your deductible is met, and you pay 25% until the total drug costs (excluding your deductible) reach $2,830.
  • Once you reach $2,830 in total drug costs, you will be in the Donut Hole and you must pay the full cost of prescription drugs until your total out-of-pocket cost reaches $6,440. This annual out-of-pocket spending amount includes your yearly deductible and co-pay amounts.
  • When you spend more than $6,440 out-of-pocket, the coverage gap ends and your drug plan pays most of the costs of your covered drugs for the remainder of the year. You will be responsible for a co-pay of $2.50 for each generic drug and $6.30 for other drugs (or 5%, whichever is higher). This is known as catastrophic coverage.

The expenses outlined above only include the cost of prescription medications. It does not include the monthly premium that you pay to the prescription drug plan.

Do All Plans Have A Donut Hole?

Some plans charged a higher monthly premium so as to provide more coverage during the Donut Hole which occurs in many plans. When deciding which Medicare Part D prescription drug plan to choose, enrollees have to consider:

  • Is there an annual deductible?
  • What is the monthly premium?
  • What drugs does the plan cover (formulary drugs)?
  • Are your usual maintenance drugs available as generic drugs or are they covered at a higher tier cost for brand-name drugs?
  • Is the pharmacy you use in the network of available pharmacies for that plan?
  • What is the initial coverage, annual coverage gap, and catastrophic protection for that specific plan?
  • Is additional assistance available because of low or limited income?


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