What is a coverage gap?
Medicare drug plans may have a “coverage gap,” which is sometimes called the “donut hole.” A coverage gap means that after you and your plan have spent a certain amount of money for covered drugs (no more than $2,400), you have to pay out-of-pocket all costs for your drugs while you are in the “gap.” The most you have to pay out-of-pocket in the coverage gap is $3,051.25. This amount doesn’t include your plan’s monthly premium that you must continue to pay even while you are in the coverage gap. Once you’ve reached your plan’s out-of-pocket limit, you will have “catastrophic coverage.” This means that you only pay a coinsurance amount (like 5% of the drug cost) or a copayment (like $2.15 or $5.35 for each prescription) for the rest of the calendar year.
Note: If you get extra help paying your drug costs, you won’t have a coverage gap. However, you will probably have to pay a small copayment or coinsurance amount.
|The example below shows calendar year costs for covered drugs in a plan that meets Medicare’s standards in 2007: |
Mr. Jones joins the ABC Prescription Drug Plan. His coverage begins
|1. Yearly Deductible||2. Copayment/ Coinsurance|| |
3. Coverage Gap
|4. Catastrophic Coverage|
|Mr. Jones pays the first $265 of |
his drug costs.
|Mr. Jones pays a copayment or |
coinsurance amount, and his
plan pays its share for each drug until
his total drug costs (including
his deductible) reach $2,400.
|Mr. Jones pays everything until he has |
spent $3,850 out-of-pocket. (This includes his yearly deductible, coinsurance and copays, and
$3,051.25 while in the coverage gap. This does not include the drug plan’s premium.) Even though he is paying everything, he gets a discount because he belongs to a Medicare drug plan.
|Once Mr. Jones has spent $3,850 out-of pocket for the year, his coverage gap ends. He only pays a small coinsurance (like 5%) or a small copayment (like|
$2.15 or $5.35) for each prescription until the end of the year.