Knowing the Medicare Part D Donut Hole

The donut hole, or coverage gap, is one of the most contentious parts of the Medicare Plan Part D prescription drug benefit and of worry to many people who have joined a Part D drug plan.

On joining a Medicare prescription drug plan, one may need to pay up to the first $310 of the drug costs. This is termed as deductible. In the beginning of the coverage phase, one pays a copayment or coinsurance, and the Part D drug plan pays its part for each covered drug until the joint amount comes up to $2840.

Once an insurance payer and his Part D drug plan expenses turn up to $2,840 for covered drugs, he is in the donut hole. One had to pay the full cost of the prescription drugs while in the donut hole previously. Though, in 2011, a 50% discount on covered brand-name prescription medications was given. The donut hole continues until your total out-of-pocket cost reaches $4,550. This annual out-of-pocket spending amount comprises the yearly deductible, copayment, and coinsurance amounts.

When one spends more than $4,550 out-of-pocket, the coverage gap ends and the drug plan pays most of the costs of covered drugs for the remainder of the year. You then are responsible for a small copayment known as catastrophic coverage.

It is significant to realize that your Part D prescription drug plan may vary from the standard Medicare plan only if the plan offers you an improved benefit.

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