Final answer:
The coverage gap in the Medicare Prescription Drug Program refers to a period where beneficiaries pay higher out-of-pocket costs after an initial coverage limit is reached, until catastrophic coverage kicks in. It was established under the Medicare Prescription Drug and Modernization Act of 2003, a response to the need for elderly and disabled individuals to afford their medications.
Step-by-step explanation:
The coverage gap under the Medicare Prescription Drug Program, often referred to as the 'donut hole', occurs after a beneficiary and their drug plan have spent a certain amount for covered drugs. In the initial phase, individuals pay an annual premium and deductible, with the federal government covering 75 percent of prescription drug costs up to a specified limit ($2,250 as per earlier provisions). Once this limit is reached, beneficiaries enter the coverage gap, where they must bear a higher out-of-pocket cost for their medications until they reach catastrophic coverage, at which point Medicare resumes substantial coverage.
The Medicare Prescription Drug and Modernization Act of 2003 was a response to the pressing need for prescription drug coverage, particularly for the elderly and disabled, who often require multiple medications. However, the implementation of this benefit has continued to be a point of contention due to concerns about its cost to the federal government, which was about $40 billion in 2006 and projected to rise significantly. The enactment of the prescription drug benefit resulted from high political pressure, with groups such as the American Association for Retired People (AARP) advocating for senior citizens, highlighting the need for such a program despite the high costs.