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Dodging the dreaded ‘doughnut hole’

The federal health care plan narrows the Medicare Part D prescription drug-coverage gap, known as the doughnut hole, by providing a rebate of as much as $250 to insured members who are not eligible for the Low Income Subsidy.

The approximately 9,000 Medicare-eligible state retirees enrolled in the Senior Supplement plan would benefit from this requirement because the plan has a Medicare Part D equivalent drug plan with a doughnut hole.

Retirees in the MedicareComplete plan have no prescription drug coverage gap.

The drug-coverage gap is the difference between the initial coverage limit and the catastrophic coverage threshold. After the coverage limit has been reached, a Medicare beneficiary is responsible for the entire cost of prescription drugs until the expenses reach the catastrophic coverage threshold.

Pat Klein, assistant director for external affairs for the Arizona State Retirement System, explains how the drug-coverage gap affects state retirees with the Senior Supplement plan. Once the amount paid by an individual for prescription drugs in a year reaches $2,830, the individual pays 100 percent of drug costs until the total hits $4,550, and then catastrophic coverage kicks in, Klein says. Right now, that comes to $1,720 in out-of-pocket expenses.

Catastrophic coverage greatly reducs costs for generic and brand name medications. An additional $250 rebate from the federal government is due in 2011, Klein says.

By 2020, the drug-coverage gap is to be phased out.

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