The Affordable Care Act and Closing
the Prescription Benefit Coverage Gap (“Doughnut Hole”)

by: Michael R. Schulze,

Under the Medicare Part D Prescription Drug Benefit, many Medicare beneficiaries have annually encountered a large gap in their prescription drug coverage that is commonly referred to as the “Doughnut Hole.” This gap in coverage occurred when the beneficiary’s total drug costs exceeded annual limits and made the beneficiary completely responsible for additional drug costs until the next spending limit was reached and the Medicare coverage resumed. This inexplicable gap in coverage has caused significant hardship for many Medicare beneficiaries. Fortunately, the Affordable Care Act is slowly closing the Doughnut Hole and is providing prescription discounts in order to reduce its impact until the coverage gap is eliminated.

The Doughnut Hole:

Different Medicare drug plans will provide prescription drug coverage in slightly different ways; however, generally, in 2013 a Medicare beneficiary will reach the coverage gap when the beneficiary’s total drug costs (what the beneficiary and the plan pay) reaches $2,970. For any prescription drug costs incurred during 2013 above that amount, the beneficiary will be responsible for the full prescription drug cost until the total drug costs exceed $4,750 (including the annual deductible and copayment/coinsurance amounts). Typically, beneficiaries needing the following drug classes reach the Doughnut Hole: alzheimer’s medication, anti-depressants, angiotensin receptor blockers, statins, ACE inhibitors, oral anti-diabetics and other high priced and brand named drugs.

The Affordable Care Act’s impact on the Doughnut Hole:

One of the Affordable Care Act’s goals was to close the coverage gap for all Medicare beneficiaries. Initially, the Act provided a $250 rebate to all Part D enrollees in the coverage gap in 2010. Starting in 2011, Medicare beneficiaries were given discounts on brand-name drugs and generic drugs once the beneficiary was in the coverage gap. Generally for 2013, beneficiaries in the coverage gap will receive a 52% discount on brand-name drugs and a 21% discount on generic drugs. The scheduled discount is scheduled to increase each year. For instance, in 2014 the discount on generics will increase to 28%.

October 08, 2013 “The Affordable Care Act and Closing the Prescription Benefit Coverage Gap (“Doughnut Hole”) Medicare Part D Coverage Gap.” (Client-Alert: