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Life Health > Health Insurance > Life Insurance Strategies

'Donut Hole' Mostly Empty, Study Concludes

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New research suggests only about 8% of Medicare beneficiaries will fall into the coverage gap for prescription drug benefits.

Under the Medicare drug benefit that went into effect this year, beneficiaries who exceed coverage limits would become fully responsible for prescription drug costs they incur, up to a specified dollar amount.

Under the law that created the Medicare Part D prescription drug coverage, annual out-of-pocket drug spending between $2,250 and $3,600 is not covered by the standard benefit. The coverage gap between these upper and lower limits is known as the “donut hole.”

The new study, prepared by PricewaterhouseCoopers L.L.P. and commissioned by the Healthcare Leadership Council, Washington, shows more than 90% of Medicare beneficiaries will either not reach the coverage gap or will have at least some coverage available to them in the gap.

PricewaterhouseCoopers researchers found Medicare beneficiary drug coverage breaks down as follows:

38% of beneficiaries have prescription drug coverage from plans outside of Medicare Part D.

23% will be eligible for low-income subsidies and, therefore, won’t enter the donut hole.

16% will have annual drug spending less than $2,250, underneath the coverage gap.

10% are not enrolled in a Part D program and have no other drug coverage.

6% have chosen enhanced Part D plans that provide some coverage of the donut hole.

“This research does underscore the importance of letting prescription drug plans compete on the basis of cost and value,” said Mary R. Grealy, president of the Healthcare Leadership Council, a coalition of chief executives of health care companies and organizations. “A single government one-size-fits-all program would not have offered options to cover the so-called ‘donut hole.’”

PricewaterhouseCoopers estimates roughly one-third of those who enter the coverage gap will spend less than $750. Another 24% will spend less than $1,750.

Based on average prescription drug spending levels, the study shows Medicare beneficiaries with spending in the gap and no previous prescription drug coverage would still have roughly $2,000 in savings this year.


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