Which stage of coverage is commonly referred to as the "donut hole" for drug coverage costs?

The stage commonly referred to as the "donut hole" is the Coverage Gap. This phase occurs after a beneficiary has spent a certain amount on medications and exceeds their Initial Coverage limit, but has not yet reached the threshold for catastrophic coverage. During this period, beneficiaries may have to pay a larger share of their drug costs out-of-pocket until they reach the catastrophic coverage level.

Understanding this stage is crucial for beneficiaries as it impacts their overall drug spending. In the Coverage Gap, the amount a beneficiary pays for their prescriptions typically increases significantly, which can create financial challenges. Once they reach the out-of-pocket spending limit, they transition to the next stage, which provides additional coverage, reducing their costs again.

The other stages mentioned have different cost-sharing structures and do not encompass the unique characteristics of the Coverage Gap. The Initial Coverage stage involves regular co-pays or coinsurance, the Deductible stage requires beneficiaries to pay fully out-of-pocket before coverage begins, and Catastrophic Coverage provides coverage when costs exceed high out-of-pocket expenses but does not involve the distinctive cost challenges of the "donut hole."