Medicare Part D coverage gap - Wikipedia Medicare Part D coverage gap This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. ( December 2012 ) The Medicare Part D coverage gap ( informally known as the Medicare donut hole ) is a period of consumer payment for prescription medication costs which lies between the initial coverage limit and the catastrophic - coverage threshold, when the consumer is a member of a Medicare Part D prescription - drug program administered by the United States federal government. The gap is reached after shared insurer payment - consumer payment for all covered prescription drugs reaches a government - set amount, and is left only after the consumer has paid full, unshared costs of an additional amount for the same prescriptions. Upon entering the gap, the prescription payments to date are re-set to $0 and continue until the maximum amount of the gap is reached OR the current annual period lapses : copayments made by the consumer up to the point of entering the gap are specifically not counted toward payment of the costs accruing while in the gap. Provisions of the Patient Protection and Affordable Care Act of 2010 gradually phase out the coverage gap, eliminating it by 2020. Contents 1 Details 2 2018 Medicare Part D Standard Drug Benefit 3 Low Income Subsidy 4 Impact on Medicare beneficiaries 5 Phase - out 6 References 7 External links Details In 2006, the first year of operation for Medicare Part D, the donut hole in the defined standard benefit covered a range in true out - of - pocket expenses ( TrOOP ) costs from $750 to $3,600. ( The first $750 of TrOOP comes from a $250 deductible phase, and $500 in the initial coverage limit, in which the Centers for Medicare and Medicaid Services ( CMS ) covers 75 percent of the next $2,000. ) In the first year of operation, there was a substantial reduction in out - of - pocket costs and a moderate increase in medication utilization among Medicare beneficiaries, although there was no evidence of improvement in emergency department use, hospitalizations, or preference - based health utility for those eligible for Part D. The dollar limits increase yearly. 2018 Medicare Part D standard drug benefit The following table shows the Medicare benefit breakdown ( including the donut hole ) for 2018. 2018 Medicare Part D Standard Benefit Coverage Phase Total Annual Drug Cost Percentage Paid by Beneficiary Percentage Paid by Plan Deductible $0 -- $405.00 100 % 0 % Initial Coverage $405 -- 3,750 25 % 75 % `` Donut Hole '' $2,700 -- $7,508.75 44 % ( Generics ), 35 % ( Brands ) 56 % ( Generics ), 65 % ( Brands ) Catastrophic Coverage over $7,508.75 5 % 95 % Jump up ^ Represents the total negotiated drug price Jump up ^ Includes 50 % discount paid by brand - name drug manufacturer and 15 % paid by plan Jump up ^ $5000 Out - of - Pocket Threshold ( TrOOP ) Jump up ^ Plan pays 15 %, Medicare pays 80 % The costs shown in the table above represent the 2018 defined standard Medicare Part D prescription drug plan parameters released by the Centers for Medicare and Medicaid Services ( CMS ) in April 2017. Individual Medicare Part D plans may choose to offer more generous benefits but must meet the minimum standards established by the defined standard benefit. The 2018 Medicare Part D standard benefit includes a deductible of $405 ( the amount that beneficiaries must pay out of pocket before their insurance benefits kick in ) and a 25 % co-insurance up to the initial coverage maximum of $3,750. Once the total annual drug costs exceed $3750, patients reach the coverage gap, also known as the `` doughnut hole ''. During the coverage gap stage, beneficiaries pay a larger percentage out of pocket until their total out - of - pocket spending reaches $5000. At $5000 of out of pocket spending, beneficiaries reach catastrophic coverage, where they pay either 5 % of total drug cost or $3.35 for generics and $8.35 for brand - name drugs. Low Income Subsidy The Low - Income Subsidy ( LIS ), also known as `` Extra Help '' provides additional cost - sharing and premium assistance for eligible low - income Medicare Part D beneficiaries with incomes below 150 % the Federal Poverty Level and limited assets. Individuals who qualify for the Low - Income Subsidy ( LIS ) or who are also enrolled in Medicaid do not have a coverage gap. To qualify for the LIS, Medicare beneficiaries must qualify for full Medicaid benefits, be enrolled in Medicare Savings Programs ( MSP ), and receive Supplemental Security Income ( SSI ). These individuals automatically qualify for the subsidy and do not have to apply separately. Others may qualify after applying through their state Medicaid programs or through the Social Security Administration ( SSA ) and fulfill income and asset requirements. In a marketplace review conducted by the Kaiser Family Foundation in 2010, only 40 % of eligible low - income beneficiaries who did not automatically qualify for the LIS actually received it. The majority of Medicare beneficiaries who qualify for the LIS will pay no premiums or deductibles and no more than $8.25 for each drug that their plan covers. In addition, beneficiaries with Extra Help are not penalized for late enrollment in a Part D plan. LIS recipients also benefit from a Continuous Special Enrollment Period to join or switch plans during any time of the year. They do not need to wait for the formal Annual Enrollment Period. Any changes made to their plans will be applied the following month. Low - Income Subsidy `` Extra Help '' Qualifications for 2017 - 2018 Household Size Maximum Annual Income Maximum Resources Individual $18,090 $13,820 Married Couple $24,360 $27,600 Jump up ^ Does NOT include food stamp assistance, housing assistance, medical treatment and drugs Jump up ^ Does NOT include home, car or life insurance policies Impact on Medicare beneficiaries This section needs to be updated. In particular : it does not reflect benefit changes following passage of the Patient Protection and Affordable Care Act of 2010. Please update this article to reflect recent events or newly available information. ( September 2017 ) The U.S. Department of Health and Human Services estimates that more than a quarter of Part D participants stop following their prescribed regimen of drugs when they hit the donut hole. Every Part D plan sponsor must offer at least one basic Part D plan. They may also offer enhanced plans that provide additional benefits. For 2008, the percentage of stand - alone Part D ( PDP ) plans offering some form of coverage within the donut hole rose to 29 percent, up from 15 percent in 2006. The percentage of Medicare Advantage / Part D plans ( MA - PD ) plans offering some form of coverage in the coverage gap is 51 percent, up from 28 percent in 2006. The most common forms of gap coverage cover generic drugs only. Among Medicare Part D enrollees in 2007 who were not eligible for the low - income subsidies, 26 percent had spending high enough to reach the coverage gap. Fifteen percent of those reaching the coverage gap ( four percent overall ) had spending high enough to reach the catastrophic coverage level. Enrollees reaching the coverage gap stayed in the gap for just over four months on average. According to a study done in 2007, premiums for plans offering gap coverage are roughly double those of defined standard plans. The average monthly premium for stand - alone Part D plans ( PDPs ) with basic benefits that do not offer gap coverage are $30.14. The average monthly premium for plans that do offer some gap coverage is $63.29. In 2007, eight percent of beneficiaries enrolled in a PDP chose one with some gap coverage. Among beneficiaries in MA - PD plans, enrollment in plans offering gap coverage was 33 percent ( up from 27 percent in 2006 ). Phase - out Out - of - pocket cost component during gap phase - out ( 2015 -- 2020 ) Year Brand - name drugs Generic drugs 2015 45 % 65 % 2016 45 % 58 % 2017 40 % 51 % 2018 35 % 44 % 2019 30 % 37 % 2020 25 % 25 % The Affordable Care Act ( ACA ), which was passed in 2010, ensured that the coverage gap or, so - called `` doughnut hole '', would be closing for patients on Medicare Part D. From 2017 to 2020, brand - name drug manufacturers and the federal government will be responsible for providing subsidies to patients in the doughnut hole. In an effort to close the coverage cap, in 2010, the Affordable Care Act provided a $250 rebate check for individuals whose drug expenses took them into the doughnut hole. The United States Department of Health and Human Services began mailing rebate checks in 2010. Starting in 2011 until 2020, the coinsurance paid for prescriptions while in the coverage gap will decrease at a rate of 7 % annually until beneficiaries will pay no more than 25 % of the drug cost for their generic and brand name prescription purchases. For instance, a 50 % mark down off brand - name medications financed by the manufacturer and a 7 % mark down off generic drugs by the government was introduced in 2011 for patients in the doughnut hole. These reductions on generic drug costs will continue to incrementally rise at a rate of 7 % until 2019. The following year in 2020, an extra cost reduction will be imposed at 12 %, equating to a total of 75 % of the generic drug cost covered. Similarly, for brand name drugs, the government will provide a subsidy at a rate of 2.5 % beginning in 2013 and escalating to 25 % in 2020. Thus, by 2020, Medicare Part D patients will only be responsible for paying 25 % of the cost of covered generic and brand name prescription medications following payment of their deductible that year. Moreover, once patients enter the catastrophic threshold, they are only responsible for 5 % of the drug cost. References ^ Jump up to : Centers for Medicare and Medicaid Services ( January 2015 ). `` Closing the Coverage Gap -- Medicare Prescription Drugs Are Becoming More Affordable '' ( PDF ). Medicare.gov. U.S. Department of Health and Human Services. Archived from the original ( PDF ) on February 21, 2015. Jump up ^ Liu FX, Alexander GC, Crawford SY, Pickard AS, Hedeker D, Walton SM ( August 2011 ). `` Impact of Medicare Part D on Emergency Department Use, Hospitalizations, and Preference - based Health Utility ''. Health Services Research. 46 : 1104 -- 1123. doi : 10.1111 / j. 1475 - 6773.2011. 01273. x. PMC 3165180. PMID 21609328. ^ Jump up to : LLC, Q1GROUP. `` 2018 Medicare Part D Program Compared to 2017, 2016, 2015, and 2014 ''. q1medicare.com. Retrieved 2017 - 11 - 06. ^ Jump up to : `` The Medicare Part D Prescription Drug Benefit ''. The Henry J. Kaiser Family Foundation. 2017 - 10 - 02. Retrieved 2017 - 11 - 06. Jump up ^ LLC, Q1GROUP. `` Medicaid, Extra Help and LIS ''. q1medicare.com. Retrieved 2017 - 11 - 06. Jump up ^ Summer, Laura. `` THE MEDICARE PART D LOW - INCOME SUBSIDY PROGRAM : Experience to Date and Policy Issues for Consideration '' ( PDF ). Kaiser Family Foundation. Retrieved November 6, 2017. Jump up ^ `` Low Income Subsidy ( LIS ) - Medicare Extra Help NCOA ''. NCOA. 2015 - 05 - 07. Retrieved 2017 - 11 - 07. Jump up ^ `` Extra Help with Medicare Prescription Drug Plan Costs ''. www.ssa.gov. Retrieved 2017 - 11 - 06. Jump up ^ LLC, Q1GROUP. `` What is NOT counted toward Income by Social Security when applying for extra help with Medicare prescription drug plan costs ? ''. q1medicare.com. Retrieved 2017 - 11 - 06. ^ Jump up to : Claffey, Jason ( August 14, 2010 ). `` Medicare ' Doughnut Hole ' Checks in the Mail ''. Foster 's Daily Democrat. Gatehouse Media. Retrieved December 26, 2012. ^ Jump up to : Hoadley, Jack ; Thompson, Jennifer ; Hargrave, Elizabeth ; Merrell, Katie ; Cubanski, Juliette ; Neuman, Tricia ( October 30, 2007 ). Medicare Part D 2008 Data Spotlight : The Coverage Gap ( Report ). Kaiser Family Foundation. Jump up ^ Hoadley, Jack ; Hargrave, Elizabeth ; Cubanski, Juliette ; Neuman, Tricia ( August 21, 2008 ). The Medicare Part D Coverage Gap : Costs and Consequences in 2007 ( PDF ) ( Report ). Kaiser Family Foundation. Archived from the original ( PDF ) on December 15, 2012. Retrieved December 26, 2012. ^ Jump up to : Shrank, William H. ; Choudhry, Niteesh K. ( 2011 - 02 - 17 ). `` Time to Fill the Doughnuts -- Health Care Reform and Medicare Part D ''. New England Journal of Medicine. 364 ( 7 ) : 598 -- 601. doi : 10.1056 / NEJMp1011625. ISSN 0028 - 4793. PMID 21247308. Jump up ^ LLC, Q1GROUP. `` The Medicare Part D Donut Hole Discount ( 2011 to 2020 ) ''. q1medicare.com. Retrieved 2017 - 11 - 06. External links Government of the United States portal Health portal Medicine portal cms.gov, the official website of the Centers for Medicare and Medicaid Services Medicare at cms.gov Medicare.gov -- the official website for people with Medicare TheMedicareForum.com, an online - community Medicare Forum. For anyone who needs help understanding Medicare or has questions about Medicare. How Stuff Works -- Medicare Retrieved from `` https://en.wikipedia.org/w/index.php?title=Medicare_Part_D_coverage_gap&oldid=845499431 '' Categories : Drug policy of the United States Medicare and Medicaid ( United States ) Pharmaceuticals policy Hidden categories : Articles needing additional references from December 2012 All articles needing additional references Use mdy dates from December 2012 All articles with unsourced statements Articles with unsourced statements from September 2017 Wikipedia articles in need of updating from September 2017 All Wikipedia articles in need of updating Talk Contents About Wikipedia Add links This page was last edited on 12 June 2018, at 05 : 42. About Wikipedia

Question: what is the doughnut hole in medicare part d
Answer: a period of consumer payment for prescription medication costs which lies between the initial coverage limit and the catastrophic-coverage threshold