Donut Hole


Health Economics

  • This term, coined in the US (where doughnuts have no 'ugh'), refers to an insurance plan in which there is a gap within the range of expenditures over which no cover is provided. The Medicare prescription drug benefit provides an example. In 2006, enrolees paid the first $250 (US) as a deductible, $25 per cent of sums up to the next $2000 in annual covered prescription drug expenditures, 100 per cent of the next $2850 in drug expenses and only 5 per cent after their expenditure exceeded $5100 in a year. These dollar amounts are adjusted annually based on the growth in per capita prescription drug spending. The 'hole' in 2006 was the $2251-5100 range. Although donut hole gaps in benefit seem arbitrary, there is political appeal: if the deductible is kept low enough, most people will enjoy at least some covered benefits and costs are lower than if there were no hole.
  • synonymDoughnut Hole