What does the "donut hole" refer to in Medicare Part D?

The "donut hole" refers specifically to the coverage gap in Medicare Part D that occurs after a beneficiary and their plan have spent a certain amount of money on covered prescriptions, but before they qualify for catastrophic coverage. When a Medicare beneficiary's total drug costs exceed a specified threshold, they enter this gap where they have to pay a higher percentage of their prescription drug costs out of pocket until they reach the next threshold that qualifies them for additional coverage. This means beneficiaries may experience significantly higher costs during this period, hence the term "donut hole" which visually represents the gap in coverage. Understanding this concept is crucial for beneficiaries to navigate potential out-of-pocket expenses effectively.