Medicare ’doughnut hole’ looms for drug customers

The federal health care overhaul delivers deep price cuts this year that will benefit Medicare prescription drug customers who fall into a coverage gap known as the "doughnut hole." But limited coverage still may pose a financial challenge for a few more years.

The Medicare drug benefit known as Part D has saddled customers who have hefty prescription bills with a big chunk of uncovered expenses every year since the plans entered the market in 2006.

Here's how the doughnut hole works: This year, customers and their drug plans must spend $2,840 before they reach the coverage gap. Then beneficiaries alone pick up the next $3,608 in costs before they become eligible for catastrophic coverage, when the plan covers 95 percent of costs.

Congress created this gap essentially to keep prescription drug spending within a budget, while offering both upfront coverage and protection against overwhelming expenses. The overhaul then took a step toward filing the gap last year, when it provided $250 checks to those who reached the doughnut hole.

This year, customers will receive more help. Companies that make brand-name pharmaceuticals are providing 50-percent discounts, and plans that offer Medicare Part D prescription drug coverage will pick up 7 percent of the cost of generics.

1. Who will this year's discount help most?

Patients who take expensive brand-name drugs will receive a big boost because the discount slices their doughnut hole bills in half.

Many patients take drugs with no generic alternatives, and their expenses can add up fast. Part D plans rarely offer brand-name drug coverage in the doughnut hole, said Jocelyne Watrous, an advocate with the non-profit Center for Medicare Advocacy who helps people with prescription drug plans.

Roughly one out of every four Medicare Part D beneficiaries reaches the doughnut hole, according to 2008 study by the non-profit Kaiser Family Foundation. Many reach it around the middle of the year.

2. What are some ways to manage costs left uncovered in the doughnut hole?

Part D customers should check with their plans for mail-order prescription discounts. Some may offer a three-month supply for the cost of a two-month supply.

Drug companies also may provide a price break for Part D beneficiaries who hit the doughnut hole, but pay attention to the details of their patient assistance programs. Discounts may be based on income or insurance levels.