What Is the Medicare Gap?

Medicare is the federally administered health care system for the elderly and disabled in the United States. Medicare Part D is the drug plan component of Medicare, offered through private health plans. According to the Daily Oklahoman, as of 2006, Part D covers 37 million Americans. One of the more newsworthy aspects of Part D coverage is known as the Medicare gap, or more commonly, the coverage gap.

Definition

The coverage gap, also known as the doughnut hole or the second deductible, is the point in Medicare Part D prescription drug coverage where the plan no longer pays for drugs after a certain amount has been paid out. Many Medicare recipients with high drug costs reach this point very quickly and are left to pay all of their drug costs out of their own pocket.

Timeline

The coverage gap begins once the total drug costs (the amount paid out by both the beneficiary and the Part D plan) reach a certain amount, which was $2,830 in 2010. After the total drug costs reach this amount, most Part D plans do not cover any more drugs. Some will cover generics. Throughout the coverage gap, the beneficiary is still responsible for paying the Part D monthly premium.

Catastrophic Coverage

The beneficiary will continue to pay for his drugs out of pocket. Once his total out-of-pocket costs (only what he has paid) reaches a certain amount ($4,550 in 2010), then he has reached catastrophic coverage. Once catastrophic coverage is reached, drug costs are significantly lowered. Beneficiaries will only be responsible for a small co-payment or coinsurance, not to exceed $2.50 for generics or $6.30 for brand name drugs, regardless of their cost tier.

Assistance

Those having trouble during the doughnut hole may find help through Part D assistance programs. Extra Help, the Social Security administered program that helps with prescription drug costs, eliminates the coverage gap completely if a beneficiary is enrolled in the program. Some states also have State Pharmaceutical Assistance Programs (SPAPs), which may offer coverage during the coverage gap. Patient Assistance Programs (PAPs), offered by drug manufacturers, may also provide assistance. Any money that an SPAP or PAP pays toward a beneficiary's drugs counts toward the out-of-pocket costs needed to reach catastrophic coverage.

Controversy

Many assistance programs have very strict income and asset guidelines, leaving many middle-class Americans unqualified and without coverage. A report from the Institute for America's Future stated that more than 55 percent of the Medicare population that enters the coverage gap will never reach catastrophic coverage. The report also showed that the coverage gap had serious ill-health effects on beneficiaries, reporting that they had a higher mortality rate than those who did not have restrictions on drug coverage.