The Medicare Part D Coverage Gap: Closing the Donut Hole

The Medicare Part D coverage gap, or the "donut hole," has long been cited as one of Medicare's most notable oversights, forcing seniors to pay for expensive drugs with money they don't have.

Why the Donut Hole Is an Issue

Studies have shown that an overwhelming number of seniors have simply foregone purchasing medication that falls within the coverage gap. However, the Affordable Care Act, passed in March of 2010, includes many benefits particularly aimed at closing the donut hole altogether.

The 2010 Affordable Care Act stabilizes the premiums of prescription drug plan Part D premiums and offers new prescription drug plans (PDPs) without a donut hole.

How the Affordable Care Act Closes the Donut Hole

Part D drug coverage is set to become more affordable through the Affordable Care Act. Closing the donut hole through discounts and increased coverage, this health care reform could potentially eliminate the coverage gap by the year 2020.

In 2010, more than 1.2 million people with Medicare received a $250 rebate check aimed at closing the coverage gap (U.S. Department of Health and Human Services, 2010).

Many pharmaceutical manufacturers have agreed to reduce drug costs for individuals with Medicare. Beginning in 2011, you'll receive a 50 percent discount on covered brand-name drugs if you reach the coverage gap in your Medicare Part D coverage. The discount takes effect when you purchase your medication at pharmacies or through the mail, and continues to apply until you reach the catastrophic coverage phase. You'll receive a 7 percent discount on generic drugs in the donut hole from 2010 and 2020. The legislation calls for a gradual transition to PDPs that have no coverage gap.

Some Important Details of the Reforms

Only qualified beneficiaries are eligible for the new Affordable Care reforms. You can receive savings if:

• You're currently enrolled in a Medicare PDP or a Medicare Advantage Plan that includes prescription drug coverage
• You have reached the coverage gap already
• You don't receive extra help to pay for your drug costs.

Although you'll only have to pay 50 percent of the price prescriptions in the donut hole, the entire cost of the drugs will count towards the amount you need to qualify for catastrophic coverage.

Closing the donut hole is just one element of how the Affordable Care Act and Medicare will influence Medicare coverage for American seniors.