Medicare Prescription Drug Coverage

Frequently Asked Questions

15. What is the coverage gap? How does it relate to catastrophic coverage?

Most Medicare Prescription Drug Plans (Part D) have a temporary limit on what they cover for prescription drugs. This limit is called the “coverage gap” (also known as the “donut hole”). The coverage gap starts after you and your plan have spent a certain amount of money for covered drugs. All Medicare drug plans are different, so call your plan if you have questions about how the coverage gap will work for you.

You won’t need to pay out of pocket for all costs while you are in the coverage gap. Once you are in the coverage gap, your plan will cover a percentage of the cost of generic drugs. You will also get a percentage manufacturer-paid discount on covered brand-name drugs. Although you will only pay a percentage of the price for that brand-name drug, the entire price will count as out-of-pocket spending, which will help you get out of the coverage gap. There will be increasing savings for you in the coverage gap each year until 2020, when you will pay approximately 25% for both covered generic and brand-name drugs when in the gap.

If you have extremely high drug costs and pay the limit (or pay through the coverage gap), all Medicare drug plans provide “catastrophic” coverage. Catastrophic coverage means that once you pay a certain amount out-of-pocket for drug costs in a calendar year, the plan will cover almost all your drug costs above that amount. (See an example in the image on the right.)

It's important to note that people who get "extra help" paying drug costs won't have a coverage gap and will pay a small or no co-payment once they reach catastrophic coverage.