The Donut Hole in Medicare Part D (the prescription drug benefit) is slowly going away. Medicare Part D has four tiers of coverage.
Here is the 2013 benefit design:
- Deductible phase where Medicare pays 0% (2013 $325)
- Basic coverage where Medicare pays 75% ($325.01 to $2,970)
- Donut hole where Medicare pays 2.5% ( $2,970.01 to $4,700) (Medicare has negotiated large discounts with providers)
- Catastrophic coverage where Medicare pays 95% of costs ($4700.01 to infinity and beyond)
There is a reasonable non-spite rationale for this benefit design. I don’t think the rationale works well as it was implemented as the donut hole was too high to discourage drug use that could be safely discouraged.