The Medicare Part D Coverage Gap

Whether you’re new to Medicare Part D or not, knowing  how it works can help you better understand your costs.  Each plan that provides drug coverage, whether it’s a stand-alone plan or a Medicare Advantage plan that includes drug coverage, will include cost sharing.
Many Medicare beneficiaries are confused by the Part D coverage gap (also know as the “doughnut hole); this is why it is important to understand how the ‘doughnut hole’ works.

How do the Drug Payment Stages work?

You share costs with the plan, usually as copays until the combined total hits $2,840 (2011).  This figure can vary by plan.  This stage is sometimes called the “initial coverage period.”
After you reach $2,840 (2011) in total drug costs, you pay 93% of the cost of generic drugs and about 50% of the cost of most brand-name drugs until your yearly drug costs hit $4,550 (2011).  During this period you pay most of the costs, your plan pays a little.  This is the Coverage Gap or Doughnut hole.

 You pay a small copay or coinsurance on all your drugs until the year’s end.  The plan pays the rest.  This is known as Catastrophic coverage and there is no limit to the amount the plan pays