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Medicare Glossary

Definitions for common Medicare terms

coverage gap

DEFINITION: Under Medicare Part D prescription drug coverage, policy holders with significant drug expenses often encounter a coverage gap – or “donut hole” – the point where their prescription drug expenses exceed the initial coverage limit of their Part D coverage but have not yet reached the “catastrophic” level of coverage.

Prior to 2011, enrollees were responsible for all drug costs while in the coverage gap, and didn’t begin receiving drug benefits again until they reached the catastrophic coverage level.  But the Affordable Care Act is slowly closing the coverage gap, and by 2020, Medicare Part D enrollees will only pay 25 percent of the plan’s cost for drugs prior to reaching the catastrophic coverage level.  In 2015, enrollees pay 45 percent of the cost of brand name drugs and 65 percent of the cost of generic drugs while in the coverage gap.