Both. When you purchase your medications, the total drug costs can move you from one part on your Medicare Part D plan into another part of your coverage. When your prescription purchase moves between Medicare plan coverage phases you will have a “straddle claim” and you will notice a difference in your drug cost. In your example, the cost of your medication purchase is split as you move from your Initial Coverage phase, above your Initial Coverage Limit and into the Donut Hole. The Initial Coverage Limit for 2011 Medicare Part D prescription drug plans is reached when the negotiated retail costs of your medications exceeds $2,840. At this point, you will enter the Donut Hole and the remainder of your prescription purchase will be reduced by the Donut Hole discount. So you will pay your co-payment (or cost-sharing) for your medication and the balance of the negotiated retail price over the Initial Coverage Limit that falls into the Donut Hole (less the 7% generic or 50% brand name discount). The total of your plan's cost-sharing plus the Donut Hole cost (not including the Donut Hole discount) cannot exceed the normal negotiated retail price of your medication -- as you never pay more than the negotiated retail price. Click here if you would like to see an example and further explanation of what happens when you buy a medication and the cost moves you into the Donut Hole portion of your Medicare Part D plan
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