Prescription Part D Coverage Gaps existEven with enrollment in a Medicare Part D prescription drug program there is still a coverage gap within the defined standard benefit. The term "donut hole" (or "doughnut hole") refers to this gap in prescription coverage. There is a gap in coverage between the initial coverage limit and the catastrophic coverage threshold. Within the donut hole, the beneficiary pays 100% of the prescription drugs costs before what is referred to as catastrophic coverage kicks in. The term "coverage gap" is preferred by Centers for Medicare and Medicaid Services (CMS) and prescription drug plans, but "donut hole" has been more widely adopted in the popular media. Details In 2006, the first year of operation for Medicare Part D , the donut hole in the defined standard benefit covered a range in true out-of-pocket expenses (TrOOP) costs from $750 to $3600. (The first $750 of TrOOP comes from a $250 deductible phase, and $500 in the initial coverage limit, in which CMS covers 25% of the next $2000.) The dollar limits increase yearly. The following table shows the Medicare benefit breakdown (including the donut hole) for 2009.
2009 Medicare Part D payments
The structure defined above is the benefit structure defined by Medicare, and from a health-plan perspective defines the amount of money that CMS will reimburse to health plans for covering prescription drugs. Individual health plans may choose to offer alternative benefit structures, generally with higher premiums, that either reduce or eliminate the donut hole. Individuals identified as "dual eligible" by CMS are not subject to the donut hole, as their prescription coverage is fully subsidized. Impact on beneficiaries Every Part D plan sponsor must offer at least one basic Part D plan. They may also offer enhanced plans that provide additional benefits. For 2008, the percentage of stand-alone Part D (PDP) plans offering some form of coverage within the doughnut hole rose to 29 percent, up from 15% in 2006. The percentage of Medicare Advantage/Part D plans (MA-PD) plans offering some form of coverage in the coverage gap is 51%, up from 28% in 2006. The most common forms of gap coverage cover generic drugs only. Among Medicare Part D enrollees in 2007 who were not eligible for the low-income subsidies, 26% had spending high enough to reach the coverage gap. Fifteen percent of those reaching the coverage gap (4% overall) had spending high enough to reach the catastrophic coverage level. Enrollees reaching the coverage gap stayed in the gap for just over four months on average. Premiums for plans offering gap coverage are roughly double those of defined standard plans. The average monthly premium for stand-alone Part D plans (PDPs) with basic benefits that do not offer gap coverage are $30.14. The average monthly premium for plans that do offer some gap coverage are average $63.29. In 2007, eight percent of beneficiaries enrolled in a PDP chose one with some gap coverage. Among beneficiaries in MA-PD plans, enrollment in plans offering gap coverage was 33% (up from 27% in 2006). CMS rule to reduce drug costs for beneficiaries The Centers for Medicare & Medicaid Services (CMS) issued a final rule that will result in lower drug costs for beneficiaries under Medicare's Part D program. The rule, which takes effect January 1, 2010, requires drug plan sponsors under Part D to use the amount paid to a pharmacy as the basis for determining cost-sharing for beneficiaries and for reporting a plan's drug costs to the agency. Under the current system, beneficiaries often pay higher prices that include sponsors' administrative costs. The CMS said the change would help slow beneficiaries' movement toward the initial coverage limit, or the "donut hole". |