It's a shame that something as tasty as a donut is now associated with something as untasty as the Medicare donut hole, a financial maze if ever there were one. Here's a quick explanation of how it works (today) and some strategies to help if you find you're falling into it.

Every person who has elected to participate in traditional Medicare has the option of purchasing a Medicare-approved prescription drug policy from a participating private Part D insurance provider.

There is no requirement that anyone enroll in Medicare Part D. However, it is now legally impossible to purchase Medicare drug coverage elsewhere, and there is a financial penalty that increases every month an individual waits beyond the initial Part D enrollment period. Enrolling in Part D several years after the initial enrollment period could be very costly.

In addition to a monthly premium that varies according to the insurance plan, many Part D participants will pay an annual deductible. Most will pay a co-payment every time they purchase a prescription. Co-payments are usually lower for generic drugs than for brand name drugs.

After paying any deductible, participants will pay only their co-pay for their prescriptions until the total amount that has been spent by both the individual and the insurance company together equals $2,700 (in 2009). For instance, if a drug costs $100, and the patient pays $25, the insurance company will pay $75. Under Part D calculations, the $75 and the $25 are added together to figure the total amount paid for the drug: $100.

Once the individual and the Part D insurance company together have spent $2,700, the insured must then pay the full cost of all covered drugs out of pocket until total personal out of pocket costs have reached $4,350 (in 2009). This is called "being in the donut hole," where there is no insurance coverage.

When the insured person has paid $4,350 for medications in a calendar year, "catastrophic coverage" begins and the Part D insurance company will pay the full cost of all medications for the balance of the year with the exception of a very small co-payment of 5% or less.

During the time the insured is "in the donut hole" and paying 100% out of pocket for all prescriptions, he or she must continue to pay the monthly Part D insurance premiums. The cost of these premiums is not included in the spending amounts above.

Whether Medicare Part D is a good idea or a boondoggle, it is the plan we have today. The biggest issue for many Medicare beneficiaries is how to get through the "donut hole" when there is no prescription drug coverage. Many will find themselves in this financial gap for several months, with no hope that they will have prescription coverage for the balance of the year. These are the people who are looking for the best ways to reduce their personal medication costs:

1. Whenever possible, even before reaching the "gap," ask if generic drugs will fit your needs.  Some Part D insurers will cover generic drugs even through the "gap." If they don't, generic medications are always less expensive than branded drugs.

2. Ask the doctor for free samples.

3. Ask if you can safely split your pills. There is often little or no cost difference for a double-strength pill. If you can safely split these pills, you can purchase 60 days of medication for the cost of 30 days.

4. Shop around. There are often wide variances between pharmacies. Comparing costs between pharmacies can save as much as 25% or more. Costco and Sam's Club pharmacies do not require that you be a club member to use their services.

5. Apply to Patient Assistance Programs. Some manufacturers offer free medications to individuals with financial needs. You can check with the Patient Assistance Program Clearinghouse at (800) 955-0989.  

6. Apply for the Extra Help low income subsidy program. Individuals with low incomes and few financial assets can qualify for subsidized coverage that has no donut hole.  

Be aware that if your drug costs are high and you expect that you will reach the catastrophic coverage portion of Part D, using these tactics to reduce your costs will stretch out the amount of time you may be stuck in the donut hole.