science

Medicare Part D coverage gap

Medicare Part D coverage gap is a science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand Medicare Part D coverage gap rather than just read about it. In short: The Medicare Part D coverage gap (informally known as the Medicare donut hole) was a period of consumer payments for prescription medication costs that lay between the initial coverage limit and the catastrophic coverage threshold when the consumer was a member of a Medicare Part D prescription-drug program administered by the United States federal government. The gap was reached after a shared insurer payment - con…

Key takeaways

Medicare Part D coverage gap belongs to science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect Medicare Part D coverage gap to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of Medicare Part D coverage gap from memory before moving on to harder problems.

Reference excerpt

The Medicare Part D coverage gap (informally known as the Medicare donut hole) was a period of consumer payments for prescription medication costs that lay between the initial coverage limit and the catastrophic coverage threshold when the consumer was a member of a Medicare Part D prescription-drug program administered by the United States federal government. The gap was reached after a shared insurer payment - consumer payment for all covered prescription drugs reached a government-set amount, and was left only after the consumer had paid full, unshared costs of an additional amount for the same prescriptions. Upon entering the gap, the prescription payments to date were re-set to $0 and continued until the maximum amount of the gap was reached or the then current annual period lapses. In calculating whether the maximum amount of gap had been reached, the "True-out-of-pocket" costs (TrOOP) were added together.

A health insurance company provided this explanation about TrOOP: "TrOOP includes the amount of your Initial Deductible (if any) and your co-payments or co-insurance during the Initial Coverage stage. While the Donut Hole includes what you pay when you fill a prescription and of the 75% Donut Hole discount on brand-name drugs, it includes the 70% Donut Hole Discount paid by the drug manufacturer. The additional 5% Donut Hole discount on brand-name drugs and the 75% Donut Hole discount on generics do not count toward TrOOP as they are paid by your Medicare Part D plan." TrOOP also included payments made for a consumer's drugs by any of the following programs or organizations: "Extra Help" from Medicare; Indian Health Service; AIDS drug assistance programs; most charities; and most State Pharmaceutical Assistance Programs (SPAPs). Provisions of the Patient Protection and Affordable Care Act of 2010 gradually phased out the coverage gap, eliminating it in 2020.

Details In 2006, the first year of operation for Medicare Part D, the doughnut hole in the defined standard benefit covered a range in true out-of-pocket expenses (TrOOP) costs from $750 to $3,600. (The first $750 of TrOOP comes from a $250 deductible phase, and $500 in the initial coverage limit, in which the Centers for Medicare and Medicaid Services (CMS) covers 75 percent of the next $2,000.) In the first year of operation, there was a substantial reduction in out-of-pocket costs and a moderate increase in medication utilization among Medicare beneficiaries, although there was no evidence of improvement in emergency department use, hospitalizations, or preference-based health utility for those eligible for Part D. The dollar limits increase yearly.

2020 Medicare Part D Standard Drug Benefit The following table shows the Medicare benefit breakdown (including the doughnut hole) for 2020.

The costs shown in the table above represent 2020 defined standard Medicare Part D prescription drug plan parameters released by the Centers for Medicare and Medicaid Services (CMS) in April 2017. Individual Medicare Part D plans may choose to offer more generous benefits but must meet the minimum standards established by the defined standard benefit. The 2020 Medicare Part D standard benefit includes a deductible of $435 (amount beneficiaries pay out of pocket before insurance benefits kick in) and 25% coinsurance, up to $6,350. The catastrophic stage is reached after $6,350 of out-of-pocket spending, then beneficiaries pay 5% of the total drug cost or $3.60 (for generics) and $8.95 (for brand-name drugs), whichever is greater. 2020 Donut Hole Discount: Part D enrollees will receive a 75% Donut Hole discount on the total cost of their brand-name drugs purchased while in the Donut Hole. The discount includes a 70% discount paid by the brand-name drug manufacturer and a 5% discount paid by your Medicare Part D plan. The 70% paid by the drug manufacturer combined with the 25% you pay, count toward your TrOOP or Donut Hole exit point. For example: If you reach the Donut Hole and purchase a brand-name medication with a retail cost of $100, you will pay $25 for the medication, and receive $95 credit toward meeting your 2020 total out-of-pocket spending limit. Medicare Part D beneficiaries who reach the Donut Hole will also pay a maximum of 25% co-pay on generic drugs purchased while in the Coverage Gap (receiving a 75% discount). For example: If you reach the 2020 Donut Hole, and your generic medication has a retail cost of $100, you will pay $25. The $25 that you spend will count toward your TrOOP or Donut Hole exit point.

Low Income Subsidy The Low-Income Subsidy (LIS), also known as "Extra Help" provides additional cost-sharing and premium assistance for eligible low-income Medicare Part D beneficiaries with incomes below 150% of the Federal Poverty Level and limited assets. Individuals who qualify for the Low-Income Subsidy (LIS) or who are also enrolled in Medicaid do not have a coverage gap. To qualify for the LIS, Medicare beneficiaries must qualify for full Medicaid benefits, be enrolled in Medicare Savings Programs (MSP), and receive Supplemental Security Income (SSI). These individuals automatically qualify for the subsidy and do not have to apply separately. Others may qualify after applying through their state Medicaid programs or through the Social Security Administration (SSA) and fulfil income and asset requirements. In a marketplace review conducted by the Kaiser Family Foundation in 2010, only 40% of eligible low-income beneficiaries who did not automatically qualify for the LIS actually received it. The majority of Medicare beneficiaries who qualify for the LIS will pay no premiums or deductibles and no more than $8.25 for each drug that their plan covers. In addition, beneficiaries with Extra Help are not penalized for late enrollment in a Part D plan. LIS recipients also benefit from a Continuous Special Enrollment Period to join or switch plans during any time of the year. They do not need to wait for the formal Annual Enrollment Period. Any changes made to their plans will be applied the following month.

Impact on Medicare beneficiaries

… excerpt ends here. Continue reading the full article.

Worked examples

Example 1 — a first encounter with Medicare Part D coverage gap

Start with the simplest possible case. Write down what Medicare Part D coverage gap claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to Medicare Part D coverage gap before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about Medicare Part D coverage gap ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of Medicare Part D coverage gap

In research: Medicare Part D coverage gap appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses Medicare Part D coverage gap in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: Medicare Part D coverage gap is common in secondary-school and first-year university syllabi. It links to neighbouring topics Drug policy of the United States, Medicare and Medicaid (United States), Pharmaceuticals policy, so understanding it makes those chapters shorter.
In everyday life: Look for Medicare Part D coverage gap outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

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How to study Medicare Part D coverage gap in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what Medicare Part D coverage gap means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain Medicare Part D coverage gap out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is Medicare Part D coverage gap in simple terms?

Why does Medicare Part D coverage gap matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study Medicare Part D coverage gap?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on Medicare Part D coverage gap.