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What Is the Medicare Donut Hole?

Medicare Part D was created to give seniors coverage for prescription drugs. Unfortunately, there is a gap, or donut hole, that limits payment past a certain dollar amount until another higher threshold is met.

  1. Deductible and Co-pay

    • At the beginning of each plan year, a participant must meet a $250 deductible and pay 25 percent of the cost of each prescription up to $2,000.

    Donut Hole

    • At $2,250 in prescription costs, your coverage stops until you reach $5,100 in prescription costs. This gap, where there is no coverage at all, is called the donut hole.

    Considerations

    • Some Medicare Part D plans have an extra coverage option that will cover the costs of your prescription drugs while you are in the donut hole, but these plans have additional costs.

    Rebate

    • In 2010, seniors received a $250 tax-free rebate designed to help cover the costs of prescription drugs while they are in the donut hole.

    Future Considerations

    • Starting in 2011, seniors on Medicare will receive a 50 percent discount on brand name prescription drugs to help offset the cost of medications and prevent high costs while in the donut hole.

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