Donut Hole (Medicare)
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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.
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.
