The Coverage Gap

What is the coverage gap, and what do I pay?

Medicare cares about what they call your total drug costs.

Your total drug costs are:

  • What you pay for the prescriptions on your plan's drug list, PLUS
  • What your plan pays for your prescriptions.

cost2 (1)If your total drug costs are greater than $2,850 in 2014, you will probably hit the “coverage gap.” The coverage gap is sometimes called the donut hole. During the coverage gap, you will pay a discounted percentage of your drug costs.

In 2014, you will pay 72% of the cost for generic drugs and 47.5% of the cost for brand name drugs. You will also pay a small fee to your pharmacy for brand name drugs. The amount you pay for drugs, plus the 50% discount the drug manufacturer pays toward brand-name drugs, will count toward your total out-of-pocket costs. You do not need to do anything to get the discount. Your pharmacy will give it to you automatically.

Once your out-of-pocket costs reach $4,550, or your total drug costs hit $6,455.00, you reach the catastrophic benefit period. Here you will pay either:

  • 5% of the costs, while your plan pays 95%, OR
  • A copay of $2.55 for generic drugs and $6.35 for brand-name drugs, whichever is greater.

How might the coverage gap affect my monthly costs?

With most of the Medicare Prescription Drug Plans, you will probably pay different amounts of your drug costs over the course of a year. Some months you will pay less; other months you will pay more. You can budget for those months if you understand how the program works.

  • Each month, you will pay your monthly premium, no matter what.
  • You must also pay the full cost of drugs until you reach the amount of your deductible.
  • After your deductible, you will pay a set percentage of your costs for covered drugs, until you reach the coverage gap.
    • The coverage gap starts when the total drug cost - the amount that you and your plan together have paid for covered drugs during the year – reaches $2,970. This amount does NOT count your premiums or costs for drugs not covered by your plan.
  • Once you reach the coverage gap, you will pay a discounted percentage of the drugs your plan covers.
  • If the total drug cost for the year reaches $6,733.75, you reach the level of catastrophic coverage.
    • Catastrophic coverage is also triggered if the amount you pay for covered drugs out of pocket reaches $4,750. This does NOT count premiums or costs for drugs not covered by your plan.
  • Once you reach the level of catastrophic coverage, you will pay at most 5% (or less) of your costs for covered drugs. Your plan will pay 95%.

NOTE: If you qualify for Extra Help with your Medicare prescription drug costs, your costs will be much lower. Visit our Extra Help section for more information about this valuable benefit.

NEXT: What counts for my “out-of-pocket” costs and catastrophic coverage?

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