What is the Medicare Donut Hole?

The Medicare Donut Hole describes an insurance coverage gap in which a person's Medicare prescription drug benefit has run out and he has to pay for all drug costs himself for the remainder of the current year. This situation applies only to those Medicare beneficiaries who have elected for prescription drug coverage under Medicare Part D. You are unlikely to run out of Part D coverage if your annual drug costs are relatively low, you have supplemental insurance coverage that covers this gap, you are eligible for Medicaid or you have other special coverage.

For 2009, the gap begins after the cost of a Medicare beneficiary's prescription drugs, including the patient's own deductibles and co-pays, has reached $2,700. The individual then is responsible for directly paying the next $3,453.75 until total drug costs have reached $6,153.75. At this point, catastrophic coverage sets in and Medicare again begins covering costs.

Here are some factors that apply to your vulnerability to entering into the coverage gap:
• Only drugs covered by your insurance plan count in the coverage formula.
• Drug-related expenses that do not count include monthly insurance premiums and any drugs purchased from other countries.
• Each year the total amount of money you must pay out-of-pocket once you reach your annual coverage cap changes. Check to see what the new coverage amount is every fall.
• Annual caps are computed on a calendar year basis.

The coverage gap or Donut Hole can be a serious problem for seniors. However, there are measures you can take to avoid finding yourself without coverage. Here are some tips:
• Review last year's drug expenses, and compare your costs to the insurance plan you have in place. See if you are likely to run out of coverage depending on the maximum dollar amounts quoted on your insurance policy.
• Keep all records related to your insurance expenses as the year progresses. Your insurance company should alert you when you are nearing your coverage maximum. Keep a log of your drug expenses each month.
• Always ask your pharmacist if a prescribed drug is covered by your insurance plan. Keep your drug purchase expense receipts so you can see how much of the cost is covered by your plan. The amount you paid is the total of any co-pay plus what your insurance paid.
• If you believe you are at risk for exceeding your annual coverage amount, tell your medical provider and pharmacist to seek generic prescriptions that are less expensive, or ask them to review your medication needs to see if alternative prescriptions can address your needs for a lower cost.
• If you have high drug costs, investigate an insurance plan that covers the gap. You can change plans between the dates of November 15th and December 31st of each year. If you change, remember that your new coverage will not take effect until the beginning of the following year on January 1st.

There are many resources available to help that can be accessed via the Internet. It is important to understand your prescription drug expenses and what coverage you can purchase to steer clear of the Donut Hole. To get help you can contact the Social Security Administration to see if you qualify for extra assistance; call 1-800-772-1213 (TTY users should call 1-800-325-0778). Or, call your local office on aging or visit www.eldercare.gov. Finally, call your State Health Insurance Assistance Program at 1-800-MEDICARE (1-800-633-4227) or visit www.medicare.gov.