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coverage gap

What is the prescription drug coverage gap?

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 with standard plan designs will only pay 25 percent of the plan’s cost for drugs prior to reaching the catastrophic coverage level, which is the same as they pay during the initial coverage period, prior to reaching the donut hole.

As of 2019, the coverage gap has closed for brand-name drugs: Enrollees with standard plan designs pay 25 percent of the cost of brand-name drugs both before and during the coverage gap (ie, until they reach the catastrophic coverage threshold). This happened one year early, thanks to the Bipartisan Budget Act of 2018 (the ACA has been steadily closing the coverage gap and it was scheduled to be completely closed by 2020; that will still be the case for generic drugs). As of 2019, enrollees pay 37 percent of the cost of generic drugs while in the coverage gap, but that will drop to 25 percent in 2020.

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