The Medicare Donut Hole explained. This is also been referred to as the donut hole in Medicare Part D prescription drug insurance program.
So what is this Medicare donut everyone is referring to? It’s simply the gap or difference between the initial limits of insurance and the catastrophic Medicare coverage for prescription drugs.
After a Medicare insured person reaches the prescription coverage limits of Medicare Part D insurance, the insured has to cover the cost until the catastrophic limits of coverage are reached.
Health care Reform Law and Medicare Part D
Federal healthcare reform legislation signed into law on March 23, 2010 made changes to Medicare Part D to reduce out-of-pocket costs when the medicare donut hole is reached. These include:
- A $250 rebate from Medicare due for 2010 expenses in the coverage gap.
- Starting in 2011, beneficiaries who reach the donut hole will be receive a 50% discount on the total cost of brand name drugs while in the coverage gap.
- Additional brand name and generic drug discounts to be phased in by Medicare.
So the effect of these changes will be to gradually close the medicare donut hole gap in coverage for all of the costs to only 25% by the year 2020.
In June of 2010, the federal government began mailing $250 checks to Medicare beneficiaries who who fall into the Medicare donut hole prescription drug coverage gap.
These rebates are the first step in closing the Medicare prescription gap and is brought about as a result of the 2010 health care reform act. Closing this gap in insurance coverage is one of the new law is helping senior Americans who get stuck when their drugs cost too much to be paid for through basic Medicare Part D coverage, but don’t cost enough to qualify for catastrophic coverage.
The Centers for Medicare and Medicaid Services will send the $250 checks monthly through the year as seniors reach the donut hole coverage limits. Qualified seniors should receive payment within 45 days of reaching the gap. The checks are sent automatically so covered seniors do not have to file any forms or paper work.
What Are The Costs?
In addition to paying a $310 deductible, Medicare beneficiaries also pay 25% of their prescription drug costs until $2,830 is reached for the year. This is where the coverage gap starts. After this amount, beneficiaries have to pay all costs until they reach $6,440. After that amount is reached, enrollees pay 5% of drug costs for the rest of the year.
Beginning in 2011, those who fall into the Medicare Part D benefit gap will get a 50% discount on brand-name drugs and a 7% discount for generic drugs. These percentages increase until they reach 75% discount and eliminate the Medicare Part D insurance gap in 2020.
Those identified as dual eligible (non-Medicare coverage is covered by Medicaid) by CMS are not subject to the donut hole. This is because their prescription coverage is already fully covered and they effectively have full health care coverage.
Opportunity for Scams
One problem seniors should be aware of is the proliferation of scams related to the $250 Medicare refund. Many scammers are calling seniors and identifying themselves as Medicare employees.
They then ask for personal information such as Social Security and bank account numbers. Those eligible should remember that the check is sent automatically to their address and no one should be calling them asking for information.