Donut Hole (Medicare)
From Wikipedia, the free encyclopedia
 |
Please see the discussion on the talk page. |
Within the Medicare Part D prescription drug program, the Donut Hole (or Doughnut Hole) is the phase of coverage in which all costs are covered by the enrollee rather than CMS. The term "coverage gap" is preferred by CMS and Prescription Drug Plans, but Donut Hole has been more widely adopted in the popular media[citation needed].
In 2006, the first year of operation for Medicare Part D, the donut hole in the standard defined benefit coverage a range in True Out of Pocket (TrOOP) costs from $750 to $3600. (The first $750 of TrOOP comes from a $250 deductible phase, and $500 in the Initial Coverage Limit, in which CMS covers 25% of the next $2000.)
The dollar limits will increase yearly.
Health economists rationalize this gap as a political compromise[citation needed] in which the optimal insurance policy for the non-poor is stop-loss in which benefit payments would only start after an insured suffers the stop-loss limit of say $3000 to $5000, after which the insurance covers 100% of the cost. The reason this is optimal is that below that figure, insureds have a 100% incentive not to waste and that only the truly unlucky would exceed the limit and they would need the insurance[citation needed]. For the needy who cannot absorb the total $3000 to $5000 stop-loss limt, the plan should have a much lower (even zero dollar) limit. In those cases, the all needed drugs would be provided free.
But since a large government program that forces all insureds to pay a sizeable premium but would only provide annual benefits to a small fraction would be politically unpalatable[citation needed], the actual drug program was designed so that everyone who bought drugs would get some benefit. This is not technically insurance but an expense reimbursement feature similar to what are nominally called "dental plans" which have very low total payment limits of $500 to $2000 per year and premiums that are a sizeable fraction thereof.
