Final answer:
The 'donut hole' in Medicare payment policy is a gap in prescription drug coverage for Medicare Part D beneficiaries, where they pay more out-of-pocket until reaching catastrophic coverage. In health financing systems, fee-for-service pays providers based on services rendered, while HMOs pay a set amount per enrollee. Deductibles, copayments, and coinsurance share costs and mitigate moral hazard.
Step-by-step explanation:
In the context of Medicare payment policy, the term 'donut hole' refers to a coverage gap in the Medicare Part D prescription drug plan. This gap begins after a Medicare beneficiary has reached their initial prescription drug coverage limit and ends when they reach the catastrophic coverage threshold. During this period, individuals are responsible for a larger portion of their prescription drug costs until their out-of-pocket expenses reach the amount that qualifies them for catastrophic coverage, after which Medicare covers a significant portion of the costs again.
Fee-for-service and health maintenance organization (HMO) are two health financing systems that operate differently. In a fee-for-service system, medical care providers receive payment according to the services they provide, whereas HMOs pay providers a fixed amount per enrolled person. Deductibles, copayments, and coinsurance are methods used to share the cost between insurance companies and policyholders, potentially reducing the risk of moral hazard, where insured individuals may not consider the costs of health services due to being insured.