| Mon, Apr 18, 2011 @ 09:00 AM

New Savings on Drugs during the Coverage Gap

Posted by Medicare Made Clear

In 2011, there is a 50% discount on covered brand-name prescription drugs and a 7% discount on generic drugs for Medicare Part D beneficiaries during the coverage gap.

There are new ways for Medicare Part D members to reduce expenses during the coverage gapFor Medicare Part D drug plans, after you spend $2,840 (2011) on out-of-pocket costs for drugs, you enter a phase called the “coverage gap.” (Informally, the “doughnut hole.”) Previously, you were responsible for 100% of drug costs during the coverage gap until you reached a maximum out-of-pocket limit. After reaching the maximum limit, you were and are eligible for “catastrophic coverage.”

Starting in 2011, members* will pay 50% (instead of 100%) of costs for brand name drugs and will receive 7% off the cost of generic drugs during this coverage gap. This coverage gap is phasing out between 2010 and 2020, starting with incremental reductions in costs to fill prescriptions. Expect additional coverage gap drug savings each year until 2020, when beneficiaries will be responsible for 25% of their drug costs during the gap.

How do the coverage gap and Medicare Coverage Gap Discount Program work?

When you fill a prescription, your drug plan sends you an Explanation of Benefits (EOB) telling you what you spent and how close you are to reaching the coverage gap. In 2011, Medicare Part D members reach the coverage gap after the member and plan together spend $2,840 in a year.

Once you enter the coverage gap, you will automatically receive a 50% discount on the price of covered brand-name drugs, or 7% on the price of generic drugs. There may be a cost to fill the prescription. For brand-name drugs, this cost is not covered in the discounted amount, but it is discounted for generic drugs.

The discount applies whether you buy drugs at the pharmacy or by mail, and covers all drugs in a plan’s formulary (list of covered drugs) and about 99% of brand-name drugs. For brand-name drugs, the entire drug cost before the discount is applied toward the amount you need to reach to qualify for catastrophic coverage ($4,550 in 2011). For generics, only the amount you pay counts toward this amount.


Mr. Smith is a Medicare Part D member who does not receive Extra Help. He reaches the coverage gap, and fills a prescription for a drug that is $50 for brand-name, $20 for generic. There is a $2 cost to fill the prescription.

If the drug is brand-name ($50) with a dispensing fee ($2): Mr. Smith pays $27. That’s 50% of the drug cost plus the entire dispensing fee. He has $52 applied toward the amount he needs to reach in order to qualify for catastrophic coverage.

If the drug is generic ($20) with a dispensing fee ($2): Mr. Smith pays $20.46. That’s 7% off the $22 total (the drug plus dispensing fee). $20.46 counts toward the amount he needs to reach in order to qualify for catastrophic coverage.

Coverage Gap Phase-Out

Over the next nine years, Medicare will be phasing in subsidies that will further reduce your expenses in the coverage gap, so check back each year to learn about new savings. For the most current information on the Medicare Part D coverage gap, check with your Medicare Part D provider. Read more ways to save during the coverage gap.


*Members who receive Extra Help do not qualify for the Medicare Coverage Gap Discount Program. You must have Medicare Part D as your primary payer for prescription drugs to qualify.


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Y0066_110411_162201 File & Use 04172011