Medicare Doughnut Hole

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DEFINITION of 'Medicare Doughnut Hole'

A range of total prescription drug spending in the Medicare Part D program where all of the costs must be covered out-of-pocket. As a result of the Medicare doughnut hole, Medicare Part D participants are forced to choose between paying higher insurance premiums, or potentially paying thousands of dollars out-of-pocket to bridge the coverage gap. Many lower-income participants in Medicare are unable to afford either option.

INVESTOPEDIA EXPLAINS 'Medicare Doughnut Hole'

While supplemental plans exist which offer some amount coverage through the doughnut hole range, they are significantly more expensive that the standard plans.

For 2014, the coverage gap was between the initial coverage amount up to $2,850 of total drug spending and the catastrophic coverage level which provides coverage when total drug spending reaches over $4,550 per year. Therefore, if total drug spending was between $2,850 and $4,550, the amount would have to paid out of pocket.

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