The donut hole closes on December 31 each year

The Medicare Part D donut hole — the coverage gap where you pay more for prescription drugs — lasts from January 1 through December 31 of each calendar year. Once you reach the donut hole threshold in any given year, you stay in it until either you hit the catastrophic coverage level (which ends the gap) or the year ends and your coverage resets on January 1.

The exact dollar amount that triggers the donut hole changes each year. In 2024, you enter the donut hole after you and your plan have spent $5,850 combined on covered drugs. Once you spend $8,550 out of pocket (your own money, not counting what your plan paid), you move into catastrophic coverage, where your costs drop significantly.

If you reach catastrophic coverage before the year ends, you stay there for the rest of that calendar year. Your costs do not reset until January 1 of the following year, when the donut hole threshold starts over.

Key Takeaways

  • The donut hole runs from January 1 through December 31 each year, and your coverage gap resets on January 1 regardless of when you entered it.
  • You enter the donut hole after combined spending reaches a set amount (which varies yearly), and you exit it once your out-of-pocket costs hit the catastrophic threshold.
  • Once you reach catastrophic coverage, your drug costs drop for the remainder of that calendar year.
  • The dollar amounts that define the donut hole change annually, so you should check your plan's details each January.
  • If you reach the donut hole late in the year, you may still benefit from moving into catastrophic coverage before December 31.

How the donut hole works month by month

Your Part D plan tracks spending in phases throughout the year. In the initial coverage phase (January through whenever you hit the donut hole threshold), your plan pays its share and you pay your copay or coinsurance. This phase ends once combined spending reaches the annual threshold.

Once you enter the donut hole, you pay a larger share of the drug cost — typically 25 percent of the drug price, though this varies by plan and drug type. You continue paying this higher amount until your out-of-pocket spending reaches the catastrophic threshold. At that point, you move into catastrophic coverage, where you pay only a small copay (usually $3.95 to $9.85 per drug) for the rest of the year.

This structure means your costs can be lowest in January through early in the year, higher in the donut hole period, and lower again once you hit catastrophic coverage. If you take many medications, you might move through all three phases in a single year.

What happens when the calendar year ends

On January 1, your Part D coverage resets completely. Any spending you accumulated in the previous year does not carry over. Your deductible (if your plan has one) resets, your initial coverage phase starts fresh, and the donut hole threshold returns to zero.

This reset happens automatically — you do not need to do anything. However, if you are in catastrophic coverage on December 31, you will return to paying regular copays or coinsurance starting January 1, even though you were just in the lowest-cost phase. This is why some people with high drug costs find December and January to be expensive months.

Planning ahead if you are approaching the donut hole

If you know you will enter the donut hole before the year ends, you have a few options to consider. Some people ask their doctor whether a lower-cost drug might work as well as their current medication. Others look into whether their plan offers a mail-order option or a 90-day supply at a lower total cost.

You can also contact your plan directly to ask about any programs it offers to help people in the donut hole. Some plans have copay information or other cost-reduction programs that are not widely advertised. Your plan's customer service number is on your insurance card.

If you are struggling to afford medications in the donut hole, talk to your doctor or pharmacist before you skip doses or stop taking a medication. They may know about patient information programs run by drug manufacturers, which can reduce your cost regardless of where you are in your coverage phases.

How to track your progress through the donut hole

Your Part D plan sends you an Explanation of Benefits (EOB) each time you fill a prescription. This document shows how much the drug cost, how much your plan paid, and how much you paid. Keep these documents or check your plan's online portal to track your cumulative spending.

Your plan is required to tell you when you enter the donut hole. You should receive a notice in the mail, though you can also call your plan's customer service number to ask where you stand at any point in the year. Many plans also have online portals where you can see your spending in real time.

Tracking your spending helps you prepare for higher costs and plan refills strategically. If you are close to the donut hole threshold, you might time a refill to happen before you enter the gap, or wait until you reach catastrophic coverage if possible.

The donut hole is smaller than it used to be

In the early years of Part D (starting in 2006), people in the donut hole paid 100 percent of their drug costs. Over time, federal law has required plans to cover more of the cost in the donut hole. Today, most people pay around 25 percent of the drug price while in the gap, though the exact amount depends on your specific plan and the type of drug.

The law continues to change how much the donut hole costs. Starting in 2025, the out-of-pocket threshold that triggers catastrophic coverage is scheduled to change, which will affect how long you stay in the donut hole. Check your plan's materials each January to see what the current thresholds are.

Frequently Asked Questions

Can I do anything to avoid the donut hole?

You cannot avoid it if you take enough medications to reach the spending threshold, but you can reduce the impact. Ask your doctor about generic versions of your drugs, which cost less and count toward your donut hole threshold more slowly. Some people also use a 90-day mail-order supply to consolidate their spending and move through phases faster.

Does the donut hole explore to all prescription drugs?

Most covered drugs are subject to the donut hole, but some are not. Drugs in the initial coverage phase and catastrophic coverage phase follow different rules. Insulin and some other drugs have special protections. Ask your plan which of your specific medications are affected by the donut hole.

What if I switch plans in the middle of the year?

If you change Part D plans, your spending with your old plan does not transfer to your new plan. You start fresh with the new plan's thresholds and phases. This can work in your favor if you switch to a plan with a lower donut hole threshold, or against you if the new plan's threshold is higher.

Do I pay the donut hole cost if I have a Medigap plan?

It depends on your Medigap plan. Some Medigap plans cover donut hole costs, while others do not. Check your Medigap policy documents or call your Medigap insurer to find out whether they help pay for drugs while you are in the Part D donut hole.

What should I ask my doctor about the donut hole?

Ask whether there are generic or lower-cost alternatives to your current medications that would work just as well. Ask whether any of your drugs have patient information programs. Also ask whether your doctor's office has a social worker or pharmacist who can help you find cost-reduction programs.