Costs in the coverage gap

Most Medicare Prescription Drug Plans have a coverage gap (also called the "donut hole"). This means there's a temporary limit on what the drug plan will cover for drugs.

Not everyone will enter the coverage gap. The coverage gap begins after you and your drug plan have spent a certain amount for covered drugs. In 2012, once you and your plan have spent $2,930 on covered drugs (the combined amount plus your deductible), you're in the coverage gap. This amount may change each year. Also, people with Medicare who get Extra Help paying Part D costs won’t enter the coverage gap.

Once you enter the coverage gap, you get a 50% manufacturer-paid discount on covered brand-name drugs. Although you'll only pay 50% of the price for that brand-name drug, the entire price will count as out-of-pocket costs which will help you get out of the coverage gap.

Example

Mrs. Anderson reaches the coverage gap in her Medicare drug plan. She goes to her pharmacy to fill a prescription for a covered brand-name drug. The price for the drug is $60 and the dispensing fee is $2. Once the 50% discount is applied, the cost of the drug is $30. The $2 dispensing fee is added to the $30 discounted amount. Mrs. Anderson will pay $32 for the prescription, but the entire $62 will be counted as out-of-pocket spending and will help Mrs. Anderson get out of the coverage gap.

You'll also pay only 86% of the plan's cost for covered generic drugs until you reach the end of the coverage gap.

Example

Mr. Jones reaches the coverage gap in his Medicare drug plan. He goes to his pharmacy to fill a prescription for a covered generic drug. The price for the drug is $20 and there is a $2 dispensing fee that gets added to the cost. Once the 14% coverage is applied to the $22, he will pay $18.92 for the covered generic drug. The $18.92 amount he pays will be counted as out-of-pocket spending to help him get out of the coverage gap.

If you have a Medicare drug plan that already includes coverage in the gap, you may get a discount after your plan's coverage has been applied to the price of the drug. The 50% discount for brand-name drugs will apply to the remaining amount that you owe.

Example

Mr. Green is in a drug plan that offers a 60% discount on brand-name drugs (after he has spent a certain amount), and he fills a $100 brand-name prescription. The cost of his prescription after his plan's savings is $40. The 50% discount is applied to the $40 amount and he will pay $20 for the prescription. The $40 will count as out-of-pocket spending and help him get out of the coverage gap.

Items that count towards the coverage gap

  • Your yearly deductible, coinsurance, and copayments
  • The discount you get on brand-name drugs in the coverage gap
  • What you pay in the coverage gap

Items that don't count towards the coverage gap

  • The drug plan premium
  • What you pay for drugs that aren’t covered

If you think you should get a discount

If you think you've reached the coverage gap and you don't get a discount when you pay for your brand-name prescription, review your next "Explanation of Benefits" (EOB). If the discount doesn't appear on the EOB, contact your drug plan to make sure that your prescription records are correct and up-to-date. If your drug plan doesn't agree that you're owed a discount, you can file an appeal.