Medicare prescription drug plans can help beneficiaries reduce their out-of-pocket expenses for prescription drugs, but there’s a catch: the coverage gap. If you’re enrolled in Medicare, you know that your prescription drug coverage essentially stops when you and your insurance plan have spent a combined total of $2,830 on prescription medications.
Beyond that point, the beneficiary covers the full cost of prescription medications until drug expenditures in a calendar year reach $4,550. If your drug costs exceed this amount, catastrophic coverage kicks in and you’ll pay either $2.50 for generic drugs ($6.30 for brand name drugs) or 5% of the drug’s cost, whichever is greater.
The new healthcare legislation aims to correct this by 2020, and is also the impetus for the $250 “gap” check that some beneficiaries who have exceeded the $2,830 spending limit will receive. Some relief provisions of the new law go into effect in 2011, and allow beneficiaries who have crossed the $2,830 threshold to purchase generic drugs at a 7% discount and brand name drugs at a 50% discount.
In subsequent years, the amount of the drug discount will increase until 2020, when all drugs will be available at a 75% discount for beneficiaries “in the gap.”
The issue isn’t a small one; about 3 million Americans each year fall into the prescription drug coverage gap, also known as the “doughnut hole.” The doughnut hole isn’t a given; some insurance options can help you avoid the coverage gap.
The American Association of Retired Persons (AARP) provides a “Doughnut Hole Calculator” in both English and Spanish, to help beneficiaries determine when or if their present coverage will allow them to fall into the gap based on their current prescription drug needs.