Most Medicare Prescription Drug Plans have a coverage gap – also referred to as the (dreaded) "donut hole". It is a stage of drug coverage where the Part D plans put a temporary limit on what they will cover for medications, based on total drug expenditures.

Not Everyone Goes Into the Gap

The coverage gap begins after you and your drug plan have spent a certain amount for covered drugs. Items that count are your yearly deductible, coinsurance and copayments.

In 2015, once you and your plan have spent $2,960 on covered drugs - you're in the coverage gap.

In 2016, once you and your plan have spent $3,310 on covered drugs, you're in the coverage gap.

This amount will change each year, as legislation passed with the Affordable Care Act will actually phase out the donut hole by the year 2020.

What Happens in the Gap?

The biggest thing you will see in the donut-hole phase of coverage is you will pay a lot more for your prescription drugs.

You will pay:

45% of the cost of brand-name medications
58% of the cost of generic drugs

When Do I Get out of the Donut Hole?

You will be in this stage of coverage until you and your plan has paid total out-of- pocket costs of $4850. Once this is met, you enter the last coverage phase – the Catastrophic Phase.

Amounts paid for medications in the Catastrophic Phase are very minimal, and you continue in this stage for the rest of the year.