Health Care Reform Provisions & Medicare Prescription Drug Donut Hole

Under the current Medicare Prescription Drug plan (Medicare Part D), once a senior reaches $2,250 of drug costs, the senior will have to pay 100% of the next $2,850, before Medicare Part D covers drug costs again. This is referred to as the “donut hole.” Once the senior has purchased $5,100 in covered prescription drugs, ($2,250 + the doughnut hole of $2,850), the senior’s costs are again covered.

Health Care and Education Reconciliation Act of 2010 passed by Congress provides at section 1101 for a $250 rebate to Medicare beneficiaries who reach the Part D coverage gap in 2010. In any quarter when an individual reaches the threshold for the donut hole coverage gap, Medicare by the 15th of the third month following that quarter shall send a $250 rebate. The individual shall only be entitled to one such rebate.

In addition the Patient Protection and Affordable Care Act and the amendments in the Reconciliation Act will gradually eliminate the Medicare Part D donut hole by 2020. For prescriptions filled in the coverage gap, there will be federal subsidies. For generic drugs the phase in will begin in 2011 and rise to 75% by 2020. For brand name drugs the phase in will begin in 2013 and rise to 25% by 2020. Pharmaceutical manufacturers will be required to provide a 50% discount on brand named drugs in the coverage gap beginning in 2011.


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