The Shrinking Donut Hole

Beginning this year, the Patient Protection and Affordable Care of 2010 has gone into effect that will begin to shrink the infamous Medicare Part D Coverage Gap - more commonly known as the "Donut Hole". Part D Prescription Drug Plans help pay cots for medications at different rates based on four different phases: the deductible, phase 1, the coverage gap, and catastrophic coverage. The deductible, which some plans do not have, is generally no more than $325 per year. After this deductible, the plan begins paying the bulk of the cost of your prescriptions, leaving you with a smaller copay or coinsurance. However, once the total retail cost of your medications reaches a certain level ($2,840 in 2011) you enter the Donut Hole begin paying 100% of your medications. The plan will begin helping with the cost of your medications again once you cross the Catastrophic out-of-pocket threshold level ($4,550 in 2011). That means that for approximately $3,600 per year, you are on your own.

Or, should we say, were on your own. Beginning this year Part D members will receive discounts on their medications when they enter the Donut Hole. In 2011, generics will be discounted by 7%, and brand-name medications will be discounted by 50%. These discounts are set to increase over the next nine years until there is a 75% discount on both generics and brand-name medications. To see a chart that depicts this Donut Hole phase-out click here.