The Medicare Part D donut hole is the annual gap between a beneficiary's initial coverage for prescription medication and the point at which catastrophic coverage applies, notes Kiplinger. Seniors who have significant medication costs pay a large portion of those expenses when they enter this period.
For 2015, seniors reach the gap once they and their insurance plan spend a total of $2,960 on covered medications. At that point, seniors pay a discounted rate for medications until their costs reach $4,700. Once seniors reach this maximum, their plan pays for 95 percent of their covered medication costs for the rest of the year, Kiplinger explains.