Before Medicare Part D, most Medicare recipients had to pay 100% of their prescription drug costs. Congress recognized that prescription drugs were becoming unaffordable, and added a drug benefit in 2005. Because drugs are expensive, Congress explored many different approaches to keeping the cost under control. The approach that was ultimately chosen is called the coverage gap or “donut hole.”

The table below illustrates how much of the drug costs you are responsible for, and how much the insurance company pays. Think of each row as being a different type of benefit.

• The Initial Coverage Period covers up to $2,830 worth of prescription drugs in 2010. As a beneficiary, you may have a small deductible, but the insurance company will cover about 3/4 of your drug costs.
• The Coverage Gap, or 'donut-hole', is the period of time when you will be fully responsible for your drug costs. This donut-hole lasts until you have spent $4,550 out of pocket on drug co-pays and full drug costs. Note that this is $4,550 spent out of your pocket — to spend this much, you will need to use more than $4,550 of drugs (typically about $6000 worth).
• The Catastrophic Coverage period is when the insurance company pays 95% of additional drug costs once you are through the donut-hole. You reach this benefit when you are out of the donut-hole, i.e., you have spent more than $4,550 on drugs, typically when the total cost of the drugs you have used has reached around $6,000.

In summary:

	Benefit Type Insurer Pays You Pay Initial Coverage Period About 75% About 25% Coverage Gap or Donut Hole Nothing 100% Catastrophic coverage 95% 5%

  How can I avoid the donut hole?

The best ways to avoid the donut hole are to either require fewer medications or choose less-expensive medications. Requiring fewer medications is a challenge for everyone, but it’s important that everyone so what they can to stay healthy. There are many websites that discuss the role of diet and exercise in reducing medication needs. Unfortunately, for many of us, fewer medications are not an option, therefore the only other way to avoid the donut hole is to take less-expensive options. Always ask your doctor if there is a generic drug that would work equally well, or if it’s possible to get a larger dose and take the medication less often. Finally, people in the donut hole this year are likely to be in it again next year, so it’s important to budget for the increased costs.

  When will I get out of the donut hole?

Once a Part D Medicare recipient has spent $4,550 over the course of the year (in 2010), they will have gone through the donut hole and have insurance coverage once again. Fortunately, at this point, about 95% of the cost of covered medications will be covered by the insurance company.