What does it mean? In healthcare circles the "doughnut hole" is a large gap that exists in the middle of most Medicare prescription drug plans (PDPs), officially known as Medicare Part D. A standard PDP typically requires the beneficiary to pay an initial deductible, $275 this year, after which the plan starts picking up 75 percent of the cost of approved prescription drugs—but only until the consumer’s annual drug bill reaches $2,510.
The consumer then has to pay 100 percent of prescription drug costs until a second annual threshold of $5,726 ($4,050 out of pocket) is met. Once the consumer’s annual total drug bill surpasses $5,726, the PDP and Medicare typically pay a combined 95 percent of drug costs from there on. Specifically, the doughnut hole refers to the gap in coverage that exists between those two spending thresholds, where the consumer has to pay 100 percent of the cost of approved prescription drugs.
Why the buzz? PDPs replaced Medicare prescription drug discount cards in 2006. Although the federal government sets certain standards for Medicare PDPs, the plans themselves are sold and administered by private-sector companies. That means Medicare consumers must sift through about 50 to 60 plans offering different benefits and covered drugs.
The size of the doughnut hole can vary widely, depending on the specifics of the plan. Some PDPs have begun to offer a few benefits within the doughnut hole coverage gap, such as helping to pay for certain generic drugs. A recent study by the Kaiser Family Foundation found that 29 percent of PDPs were offering some sort doughnut hole benefits in 2008, up from just 15 percent in 2006. Several even offer some coverage within the doughnut hole for brand name drugs. But that same study found a relatively small number of Part D enrollees are expected to be in plans that offer full coverage of brand-name drugs in the gap raising concerns that some enrollees who reach the gap might forgo needed medications when faced with the full cost of their prescriptions.
Another major concern is the huge number of Part D plans available, with widely varying costs and benefits. That means Medicare-dependent seniors are faced with the daunting task of sorting through about 50 to 60 different plans to determine which one best suits their specific needs. Making things worse, many PDPs change their benefits and covered drugs each year, meaning Medicare consumers can't be assured their benefits will remain the same, even when they stay with the same PDP.
Essential Information: Find out more about Medicare’s doughnut hole at: Medicare Part D Fact Sheet, WebMD; Medicare Part D Drug Plans, Consumer Reports; Medicare Rights Center Web Page; Kaiser Family Foundation Study on Medicare Prescription Drug Plans; and Patient Assistance Programs, Consumer Reports Best Buy Drugs.
—Bob Williams, strategic resource director, Consumers Union