The Medicare Prescription Drug Coverage Gap

(the “Doughnut Hole”)

Most Medicare Part D plans have a coverage gap, sometimes called the “Doughnut Hole.” This means that after you and your drug plan have spent a certain amount of money for covered drugs, you have to pay all costs out-of-pocket for the drugs, up to a yearly limit. Your yearly deductible, coinsurance or copayments, and what you pay while in the coverage gap all count toward this out-of-pocket limit. The limit does not include the drug plan’s premium or what you pay for drugs that are not on your plan’s formulary or prescription drug list.

There are plans that offer some 250coverage during the gap, like for generic drugs. However, plans with gap coverage may charge a higher monthly premium. Check with the plan first to see if your drugs would be covered during the gap.

Once a person reaches the plan’s out-of-pocket limit during the coverage gap, “catastrophic coverage” automatically kicks in. Catastrophic coverage assures that once a person has spent up to the plan’s out-of-pocket limit for covered drugs, he or she will only pay a small coinsurance amount or a copayment for the rest of the year.

It is important to note that people who get Extra Help paying drug costs will not have a coverage gap and will pay a small or no copayment once they reach catastrophic coverage.