Question: What is the Medicare Part D Coverage Gap, or Donut Hole?
Answer: The Medicare Part D coverage gap, often referred to as a "donut hole", refers to a period of time during the coverage year when the beneficiary will be responsible for paying all drug costs out-of-pocket, with no help from the plan.
Perhaps it is not entirely accurate to describe it as a period of time, so much as a period of money. The Part D standard benefit is structured so that the beneficiary pays a $250 deductible, and then gets help paying for the next $2000 worth of prescriptions. After the first $2250 in drug spending, however, the coverage gap begins, and the beneficiary gets no help at all until he or she reaches the catastrophic limit, which comes after he or she has spent over $5100 in drugs. Even though Part D helps with some of the costs, a beneficiary would have to pay $3600 out of pocket before reaching that catastrophic limit where Part D pays for 95% of their drug costs.
For a handy chart showing how the Part D benefit works and where the coverage gap is, see my article on Part D Basics.
There will also be a coverage gap in 2007, but the numbers will be slightly different:
- The Annual Deductible will be $265 instead of $250.
- For drug costs from $265-2400, Part D will pay 75% of the cost.
- For drug costs from $2401-5451, Part D will pay NOTHING. This is the 2007 coverage gap.
- For drug costs exceeding $5452 in 2007, Part D will pay 95%.
