Donut Hole Insurance Explained
When one first hears about Medicare, the typical thought is similar to Social Security - it's a fully paid
government benefit one gets in retirement at age 65. In reality, Medicare has a financial gap of coverage
in the area of cost most people experience when taking care of their health needs, particularly
pharmaceuticals. This gap, known as the donut hole has frustrated and created a financial obstacle for
thousands of people annually. As a result, many used to pay for donut hole insurance to obtain financial
coverage not provided by the government. Unfortunately, that option doesn't exist anymore.
In some ways, the donut hole saves the government
from having to pay for numerous lower-level medical
costs of seniors that can probably be paid out of pocket.
This saves taxpayers from covering every little ailment
and instead reserves the funds for serious health needs
such as surgery, cancer treatment, accident recovery
and similar significant assistance. In others though, the
donut hole blocks people from getting care when they
can't come up with out-of-pocket funds to pay bills until they
reach above the donut hole limit to be covered again.
The donut hole gap represents a financial point that
begins at a specific dollar amount and continues until
the Medicare member reaches an aggregate dollar
ceiling specified by the federal government. Once
reached, Medicare coverage kicks in again and the affected patient no longer has to pay out-of-pocket.
This gap, built into the Medicare 2003 redesign as a component of Medicare Part D, affects costs
incurred associated with prescription drugs. The actual law change is known by a big fancy name, the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003. It didn't take effect until
January 2006, however. Most in government refer to it as the MMA Act or Medicare Reform.
The Act broke up Medicare into four different parts. Parts A and B provide for in-hospital and out-patient
services. Part C acts as an HMO program in lieu of Parts A and B if one signs up for a Part C plan
instead. Some folks like to deal directly with Medicare providers, while others prefer an HMO-style
approach that they had when still working. The multiple parts give them a choice. Part D represents the
medical drug coverage part of Medicare. It can be incorporated into Part C or it can
be handled separate. The Act also eliminated the ability to buy private donut hole
Despite significant amount of government press, documentation, guide books,
pamphlets and video programs, new Medicare members continue to be rudely
surprised by the existence of the donut hole financial gap and lack of coverage
solutions, especially when it kicks in and they have to pay a full medical bill out-of-
For seniors, the financial gap is just downright frustrating and insulting. After spending a lifetime working,
paying taxes, and finally being allowed to claim long-promised Social Security and Medicare coverage
dangled in front for decades, paying a full medical bill after the fact is about as tasty as swallowing castor
oil. Additionally, the other parts of Medicare are not free either. While the federal program does cover a
significant amount of health expenses seniors incur, they still have to pay a monthly premium bill to
receive the services of Parts A and B.
An easy to understand guide to “Donut Hole Insurance”