Understanding the Medicare Part D Donut Hole: Coverage & Costs

Medicare Part D was created to give seniors coverage for prescription drugs. Unfortunately, there is a gap, or donut hole, that limits payment past a certain dollar amount until another higher threshold is met.

Deductible and Co-pay

• At the beginning of each plan year, a participant must meet a $250 deductible and pay 25 percent of the cost of each prescription up to $2,000.

Donut Hole

• At $2,250 in prescription costs, your coverage stops until you reach $5,100 in prescription costs. This gap, where there is no coverage at all, is called the donut hole.

Considerations

• Some Medicare Part D plans have an extra coverage option that will cover the costs of your prescription drugs while you are in the donut hole, but these plans have additional costs.

Rebate

• In 2010, seniors received a $250 tax-free rebate designed to help cover the costs of prescription drugs while they are in the donut hole.

Future Considerations

• Starting in 2011, seniors on Medicare will receive a 50 percent discount on brand name prescription drugs to help offset the cost of medications and prevent high costs while in the donut hole.