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As a social worker or social service provider, if you have elderly clients who have Medicare, you will have questions about Medicare's prescription drug coverage, known as Part D, and many of these questions will center on the so-called "Donut Hole" or coverage gap. The following answer assumes the continued existence of the Affordable Health Care Act of 2010 (the "ACA").
Simply put, the Donut Hole is a coverage gap under some, but not all, Medicare drug plans, which means that after your client (as well as the client's drug plan) has spent a specified amount of money for drugs covered by the drug plan, he or she will most likely pay more for drugs--up to another specified limit. This is the "donut hole." In 2013, for example, if your client reached a limit of $2,970 in prescriptions, he or she entered the donut hole, the coverage gap, and was responsible for out-of-pocket expenses for drugs (which may have been discounted but still require the client to pay the entire discounted amount). As an adviser, you need to keep in mind that almost every state has at least one prescription plan that covers the Donut Hole either partially or fully.
Under the ACA, however, your client most likely has some benefits that will mitigate the effects of the gap in coverage. The ACA requires insurance providers who offer Part D coverage to discount brand name drugs under certain conditions and provide equal coverage for brand-name and generic drugs. For example, in 2013, there was about a 53% discount on brand-name drugs and a 21% discount on generic drugs. Assuming the ACA remains unchanged, the Donut Hole will close in 2020. In addition, beginning in 2014, when a person is in the coverage gap, Medicare will pay 28% of the price of generic drugs, which leaves 72% of the cost to your client.
Lastly, if your client does have a coverage gap, encourage him or her to keep track of prescription purposes by looking at the "Explanation of Benefits" provided by the prescription plan provider each month, which sets out how much your client has spent on covered drugs and how close he or she is to the coverage gap. The Donut Hole is truly frightening only if the client is surprised by it--to be forewarned is to be forearmed.
When supplemental plans offer some amount coverage through the doughnut hole range, they are usually more expensive that the standard plans.
Refer to the website below for an example of "doughnut hole".
A Donut Hole is another word for a coverage gap. From what I understand, in Medicare's standard prescription plan, the Donut Hole starts when your retail drug cost reaches $2,850. In the past the coverage limit was as low as $1,800. When you reach the Donut Hole, your plan will pay the difference between the retail cost and out of pocket cost.
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