While prescription drugs are expensive, this year Medicare beneficiaries will receive more help with their prescription drug costs, thanks to health care reform. Starting now in 2011, once a beneficiary and his/her drug plan have spent a combined $2,840 on covered drugs, s/he will reach a coverage gap also known as the “donut hole.” At that point, the beneficiary pays only 50% out-of-pocket on covered brand-name drugs and 93% on covered generics until their out-of-pocket costs reach $4,550 for the year. (Note that the entire cost of the drug is counted towards this $4,550 threshold, not just the 50% the beneficiary pays). This is different than previous years where beneficiaries paid 100% of their drug costs during the donut hole.
After reaching the out-of-pocket maximum of $4,550, a beneficiary pays 5% or a small copayment for covered drugs, whichever is greater.
The donut hole will gradually decrease over the next 10 years until it is completely eliminated in 2020 and beneficiaries pay just 25% of their drug costs.