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The "doughnut" in the Medicare drug program is an example of how Social Security and Medicare can be means tested.

<<Congress crafted Part D with two main goals: to provide affordable coverage for seniors with average drug expenses and to provide catastrophic coverage for people with huge drug bills.

Under the standard Part D plan, Medicare pays for two-thirds of the first $2,250 in purchases. It also pays for 95 percent of the cost of drugs after $5,100. But in between those amounts is the doughnut hole — $2,850 wide — that seniors must cover entirely out of their pockets.

Even seniors who may be aware of the hole still underestimate its size, because they incorrectly think it stretches only from $2,250 to $3,600 instead of $5,100. But the hole actually ends when the patient's personal spending for the year has topped $3,600. When added to what Medicare has contributed to the drug purchases along the way, it equals $5,100 worth of purchases.>>

<<Many retirees and all of the low-income people rolled over from Medicaid are exempt from the doughnut hole because their employers or the government pays to cover the gap. Seniors whose incomes are below 150 percent of the federal poverty level ($14,700 singles; $19,800 couples) can apply for subsidies from the Social Security Administration to plug the gap.

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