The Medicare Donut Hole refers to out of pocket costs for beneficiaries on prescription drug coverage. Until 2010, beneficiaries were required to pay 100 percent of their annual drug costs between $2,700 and $4,350 each year. After $4350, their prescription coverage would kick in again. With Obamacare going into effect, in 2013 participants pay 52.5 percent of brand name medications and 79 percent of the cost of generic drugs. The donut hole now is between $2,970 and $4750.