Closing Medicare Part D's Donut Hole

There has been a lot of talk about the closing of the “Donut Hole” in the last year and this mainly due to the new “Patient Protection and Affordable Care Act (PPACA)” which passed in 2010. This one act has effectively closed the drug gap by the year 2020..

This is great news as one of the biggest issues with Medicare Part D is this Donut Hole and on the surface it appears to be solved. But with an action there is always a reaction and let’s look at how all of this plays out.

(For an even bigger issue see our article – “Medicare’s Tier 4“)

What the “Donut Hole” is as defined by www.medicare.gove is “a temporary limit on what the drug plan will cover for drugs. Not everyone will enter the coverage gap. The coverage gap begins after you and your drug plan have spent a certain amount for covered drugs”.

The amount in 2012 that needs to be spent on drugs is $2,930, it includes everything that is spent by the beneficiary and the insurer. Once at this amount the beneficiary is defined as being in the “Donut Hole” and is now responsible for 100% of all drug costs.

There is some relief though, for those that reach the “Donut Hole” they will receive a 50% manufacturer-paid discount on covered brand-name drugs along with a 7% discount on all generic drugs too. They will also receive a $250 rebate just reaching this gap.

While in this gap the beneficiary is own their own until a total of $4700 is spent. After this amount is spent catastrophic coverage then kicks in and the beneficiary will have a 5% co pay while the insurer picks up the rest of the tab for the remaining part of the year.

Again, this is great news, over the next few years the Donut Hole will go away and beneficiaries will no longer have to worry about this gap in coverage. The new legislation on the books calls for a bigger discounts on drugs for those in this gap until there is no cost to the beneficiary.

Ultimately, the 3.4 million people who reach the Donut Hole each year will no longer have to worry about that large cost by 2020 but here comes some bad news – the other 27.5 million that have some form of Medicare Prescription Drug insurance who never reach the “Donut Hole”, they will now be stuck paying 25% on all drugs.

Yes, by 2020 the Donut Hole will be closed and it will be replaced with a 25% costs sharing across the board for all brand name & generic drugs – for those that never reached the “Donut Hole” they will now see their overall drug bill increase starting in 2020.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.