What is the doughnut hole?
In 2003, Congress passed legislation creating the Medicare drug benefit, which went into effect in 2006. The benefit is offered by private insurers through free-standing drug plans and Medicare Advantage plans, which also offer medical benefits. The Part D plans have some leeway in how they design their coverage. But under the typical benefit for 2010, beneficiaries have to pay a deductible of $310 and monthly premiums averaging $38.94. After meeting the deductible, beneficiaries are required to pay 25 percent of their drug costs; their drug plans, which are subsidized by the government, pick up the rest. Once total spending by the patients and their drug plans exceeds $2,830, the beneficiaries hit the coverage gap, in which they must pay the full cost of their medications. After they spend another $3,610, they’re eligible for what’s called “catastrophic” drug coverage, under which they pay only 5 percent of their drug costs. What will the new legislation do to close the gap? Beginning
