What is the "Donut Hole" in Medicare Part D?

The "Donut Hole" refers specifically to the coverage gap in Medicare Part D, where beneficiaries experience an increase in their out-of-pocket costs for prescription medications. After reaching an initial coverage limit in their drug plan, beneficiaries enter this gap, leading to higher costs until they reach a catastrophic coverage threshold. During this period, the insurance coverage for medications diminishes significantly, which requires beneficiaries to pay a larger portion of the medication costs compared to the earlier phase of their coverage. This concept is critical to understanding how Medicare Part D manages drug coverage and costs for participants, highlighting the financial implications that may arise as individuals fill their prescriptions beyond a certain cost threshold.