Medicare Part D drug coverage


The Patient Protection and Affordability Act addresses the gap in coverage Medicare Part D enrollees experience when they exceed the initial coverage limit of $2,840. Prior to 2011, most* Medicare Part D enrollees were required to pay 100 percent of prescription drug costs once expenses exceeded the initial coverage limit and until they reached $4,550 (catastrophic coverage). This gap in coverage is often referred to as the “donut hole.”

This provision includes a structured plan to fill the “donut hole” gap.

  • Beginning in 2011, Part D enrollees who reach the gap received a 50 percent manufacturer discount on the total cost of their brand-name medications.
  • Beginning in 2013, in addition to the 50 percent discount, a portion of the cost of brand-name medications in the gap were covered.
  • By 2020, this will reach an ultimate benefit of 75 percent coverage, including manufacturer discount.
  • Beginning in 2011 through 2020, Part D will also cover a portion of the cost of generic medications in the gap, reaching 75 percent by 2020.
  • The actual out-of-pocket amount paid to become eligible for catastrophic coverage will be reduced by the amount of current manufacturers' discounts.
  • In addition to the Part D gap adjustments, the Retiree Drug subsidy paid to employer plan sponsors is now taxable income.