If you are enrolled in Medicare Part D, you have probably already been told about the Medicare coverage gap. The coverage gap is an area on the Part D fee schedule where you will lose all Medicare coverage relating to prescription drugs — on a temporary basis only — until you have paid enough out of pocket to leave this gap. The gap, also called the “donut hole,” can create a financial hardship for some people who are qualified Part D recipients. Unfortunately, you may end up spending thousands and thousands of dollars before you are able to exit the donut hole.
Once you manage to depart the Medicare Part D “donut hole” for the year, you will actually receive more benefits than you did when you first entered it. As you approach the “hole,” the amount that you are expected to pay out of pocket goes up — until the point where you reach it and must pay 50% of your prescription medication costs out of pocket. The reason this is 50% and not 100% is because some portion of your prescription medication will be paid for through a special subsidy set aside by the drug manufacturers you order medications from.
Although the “donut hole” is usually understood as a necessary cost saving measure that the program requires to keep working, it can be a problem. For many Medicare Part D recipients, the “donut hole” represents a very severe financial hardship. It might make it difficult or impossible to pay for medically necessary medications. For this reason, it’s possible to look at some alternative options that will prevent you from entering the donut hole in the first place. If you have low income — $16,755 or less as of the time of this writing — you can apply for a special government subsidy.
If you qualify for this subsidy, the “donut hole” simply will not apply to you. However, since you may reach the Medicare Part D donut hole once a year every year, you will have to continuously ensure that you qualify for the subsidy. That might mean re-applying on an annual basis and making certain that your income does not rise above the given level. Remember that the amount that you are permitted to have while still qualifying for the “gap insurance” varies if you are married. Non-cash income such as income from stocks and bonds may also be counted here.