The “donut hole” is a coverage gap in the Medicare Prescription Drug Plans (Part D) program, which covers prescription drugs. Patients fall into the hole after spending a certain amount of money on covered drugs; they then have to pay the full cost for prescriptions until they hit a yearly limit. After they hit that limit, their drug plan will cover prescriptions again. At this point, beneficiaries automatically receive "catastrophic coverage," which ensures they only pay a small coinsurance amount or co-payment for covered drugs for the rest of the year.
In 2012, patients will receive drug coverage until their total prescription costs (their spending plus the drug plan’s spending) reaches $2,930. Once it reaches $2,930, beneficiaries are inside the "donut hole" and must pay the full cost for prescriptions. They continue to pay the full cost until they hit $4,700 (the yearly limit). Once they reach the yearly limit, their drug plan will cover prescriptions again. In 2012, patients in the coverage gap (donut hole) will receive a 50 percent discount from the manufacturer on covered brand-name drugs; the entire cost of the prescription, however, will still count as out-of-pocket spending to get people out of the donut hole as quickly as possible.
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