If a Senior enrolls into a Medicare prescription drug plan, that Senior may have to pay up to the first $310 of the drug costs. This is known as the deductible.

During the initial coverage phase, the senior pays a copayment or coinsurance, and his or her Part D drug plan pays its share for each covered drug until your combined amount (including your deductible) reaches $2840. Once the Senior and their Part D drug plan have spent $2,840 for covered drugs, he or she will be in the donut hole.

Previously, the Senior had to pay the full cost of the prescription drugs while in the donut hole. However, in 2011, you get a 50% discount on covered brand-name prescription medications. The donut hole continues until your total out-of-pocket cost reaches $4,550. This annual out-of-pocket spending amount includes your yearly deductible, copayment, and coinsurance amounts.

When a Senior spends more than $4,550 out-of-pocket, the coverage gap ends and the drug plan pays most of the costs of covered drugs for the remainder of the year. The Senior would then be responsible for a small copayment. This is known as catastrophic coverage.

It is important to understand that your Part D prescription drug plan may differ from the standard Medicare plan only if the plan offers you a better benefit. For example, your plan can eliminate or lower the amount of the deductible. And, your plan can pay for generic or brand name medications in the coverage gap.

The "Affordable Care Act" signed into law on March 23, 2010 makes several changes to Medicare Part D to reduce seniors out-of-pocket costs when they reach the donut hole, including:

a)In 2010, if you had expenses in the coverage gap, you should have received a $250 rebate from Medicare.

b)Beginning in 2011, if a Senior reaches the donut hole, he or she will be given a 50% discount on the total cost of brand name drugs while in the gap.

Medicare will phase in additional discounts on the cost of both brand name and generic drugs.

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