|  | Healthcare Industry | Health Insurance

Explanation of Donut Hole for Medicare

Many seniors are concerned about the donut hole and not because of the impact on their cholesterol. The donut hole refers to the gap in coverage for prescription drugs seniors need that are not covered by insurance. Seniors must bear the entire cost of these drugs or go without, which may have devastating effects on their health.

  1. Prescription Drug Limit

    • Medicare enrollees who choose Part D as part of their insurance package receive some benefit to offset the cost of prescription drugs. Participants in Medicare Part D pay a monthly premium in exchange for the financial benefits of the coverage. Details vary by plan, but most include a deductible and an initial coverage limit. Participants pay 100 percent of the drug cost until the deductible is reached. Once the participant reaches the deductible, he only pays a portion of the drug cost. The initial coverage limit is the maximum amount paid by the plan, which is $2,830 or less. Once the participant reaches this limit, the plan covers no more prescription drugs for the year.

    Catastrophic Coverage

    • Catastrophic coverage kicks in once the participant reaches out-of-pocket costs of $4,550. Once the participant reaches this point, the insurance pays a minimum of 95 percent of the individual's remaining prescription drug costs. The gap between the prescription drug coverage limit and the point where the catastrophic coverage goes into effect is called the donut hole, leaving participants to carry the financial burden during this period.

    What Medicare Is Doing

    • Recognizing the burden Medicare participants face paying for prescription drugs, Medicare has taken steps to reduce the impact of the donut hole. Effective Jan. 1, 2011, participants reaching the donut hole qualify for a 50 percent reduction in the cost of brand name drugs and a 7 percent reduction in generic drugs. These discounts will increase until the year 2020. Participants who have paid more than $940 for prescription drugs also qualify for a $250 rebate check.

    What You Can Do

    • Medicare Part D participants can reduce their own costs by discussing alternative treatments with their doctors and shopping around for cheaper pharmacies. Participants should also be aware of scammers who prey on individuals struggling to pay for their prescription drugs. Educate yourself regarding the options available for coverage. Choose the best coverage you can afford.

Health Insurance - Related Articles