Medicare Part D ‘Donut Hole’ To Be Closed By 2020

Under the current Medicare regime, seniors enrolled in the Medicare Part D drug plan for 2010 are not only required to pay a $310 deductible, they must also pay 25% of their drug costs until the total reaches $2,830 for the year.  After that, Medicare recipients are liable for drug costs until their yearly out-of-pocket expenses exceed $4,550.  At that point, the coverage gap ends and recipients are only responsible for the higher of a designated copay amount ($2.40 for generic drugs and $6.00 for other drugs) or 5% of their drug costs.  This Medicare coverage gap is also referred to as the “donut hole.”

The healthcare reforms issued by President Obama’s administration include provisions for closing the donut hole. Pursuant to these reforms, seniors in the coverage gap will receive a $250 rebate from Medicare in 2010.  In 2011, seniors in the donut hole will be given a 50% discount on brand name prescription drugs and a 7% discount on generic prescription drugs.

Those numbers will steadily rise in the next few years until they reach 75%.  By 2020, the Medicare Part D coverage gap will effectively end, making Medicare recipients responsible for only 25% of the costs.

The closing of the Medicare donut hole is one of the first significant accomplishments of the Obama administration’s healthcare reforms.  According to the Department of Health and Human Services, an estimated 4 million seniors will receive $250 rebates this year.