The disappearing doughnut hole

In 2013, millions of seniors were able to save money on their prescription medicines with the help of Medicare Part D. However, recent changes in the healthcare law will soon phase out a once-serious problem with the amount of coverage Medicare beneficiaries receive with prescription drug plans.

What is the doughnut hole?
The doughnut hole commonly referred to deals with a coverage gap in Medicare prescription drug plans. Most simply, the coverage gap means that there is a limit on how much Medicare will pay for prescription drugs. Once the limit is reached, a Medicare beneficiary used to have to pay for the remaining amounts for medicines.

In 2014, the coverage limit for prescription drugs is $2,850 – including the total amount and a deductible. For seniors who reach the coverage gap, the cost can be detrimental to finances, as Medicare requires the beneficiary to pay 47.5 percent of the cost of covered brand-name drugs. Seniors are required to pay 28 percent of the cost of generic drugs once they enter the coverage gap.

As part of Medicare Part D, prescription drug plans have monthly premiums that seniors pay directly out of pocket. Medicare will cover most of the cost of prescription medicines, and seniors are required to pay the remaining 25 percent until they reach the coverage gap.

Affordable Care Act changes
Under the new healthcare law, the doughnut hole will eventually become a thing of the past. When the law was first enacted in 2011, seniors who reached the doughnut hole were given a $250 rebate to help cover some of the expenses for prescription drugs. Additionally, the new law enabled many seniors to save more on prescriptions by increasing discounts. According to the Center for Medicare and Medicaid, 6.6 million Americans have saved more than $7 billion in prescription medicine since the Affordable Care Act was enacted.

By 2020, the coverage gap will be gone and seniors will be required to pay 25 percent of all prescription expenses until they reach the yearly out-of-pocket limit. Seniors who have a Medicare Part D prescription drug plan will continue to receive coverage during this time. For seniors who reach the coverage gap in 2014, there are a number of ways to save money on prescription drugs, from buying in bulk and ordering generics to applying for assistance programs.

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