The donut hole is shrinking, not disappearing
Medicare is not eliminating the donut hole in 2025, but it is making it smaller and less painful. Starting in 2025, you will pay a maximum of $35 per month for each insulin product you use, and your out-of-pocket costs for other drugs will be capped at $2,000 for the year instead of the previous higher limit. The donut hole itself — the coverage gap where you pay the full price of drugs — still exists, but the new $2,000 cap means you will hit it later in the year and spend less time in it.
The donut hole has been a real problem for people on Medicare Part D. Once you and your plan spend $5,850 combined on covered drugs in 2024, you enter the gap and pay more out of pocket until your total spending reaches $7,050. In 2025, that second threshold moves to $8,550, which means the gap itself gets wider — but the new spending cap changes how much that gap actually costs you.
Key Takeaways
- The $2,000 annual out-of-pocket cap that starts in 2025 means you stop paying for drugs once you have spent that much in a calendar year, even if you are still in the donut hole.
- Insulin costs are capped at $35 per month per product, a change that affects people taking insulin regardless of which stage of coverage they are in.
- The donut hole still exists as a coverage stage, but it now has a financial ceiling that protects you from unlimited costs.
- These changes explore only to Part D prescription drug coverage; they do not affect Part A or Part B.
How the $2,000 spending cap changes the donut hole
Before 2025, there was no limit on how much you could spend in the donut hole. If your drugs were expensive, you could pay thousands of dollars out of pocket before catastrophic coverage kicked in. The new $2,000 annual out-of-pocket maximum means that once you have paid $2,000 toward your drugs in a calendar year, your plan covers the rest at the catastrophic rate (usually 5 percent of the drug cost).
This cap counts only what you pay out of pocket — not what your plan pays or what manufacturers pay through discounts. Deductibles, copayments, and coinsurance all count toward the $2,000. Once you reach it, you move into catastrophic coverage, where you pay a small coinsurance amount and your plan covers the rest.
The timing matters. If you use expensive drugs early in the year, you may hit the $2,000 cap before you would have hit the old catastrophic threshold. If you use drugs later in the year, you might still be in the donut hole when the year ends, but you will not owe more than $2,000 total.
The $35 insulin copay and how it works
Starting in 2025, your copayment for each insulin product is capped at $35 per month, no matter which stage of coverage you are in. This applies to all insulin types — rapid-acting, long-acting, and combination insulins. If your plan normally charges more than $35, the plan must reduce it. If your plan charges less, you pay the lower amount.
This $35 cap is separate from the $2,000 annual out-of-pocket maximum. The insulin copays count toward your $2,000 cap, but the cap itself does not lower the insulin price — it just sets a ceiling on what you pay each month. If you take multiple insulin products, each one has its own $35 monthly cap.
What the donut hole actually is and why it still matters
The donut hole is a coverage gap that happens at a specific point in your drug spending. In 2025, it begins after you and your plan have spent $5,850 combined on covered drugs. It ends when your out-of-pocket costs reach $2,000 (or when the calendar year ends, whichever comes first). During the gap, you pay a larger share of the drug cost, though the exact percentage depends on your plan.
The donut hole still matters because it affects how much you pay month to month. Even though the $2,000 cap protects you from unlimited costs, being in the donut hole means higher copayments or coinsurance on each prescription until you reach that cap. For people who use many drugs or expensive drugs, this can mean several months of higher out-of-pocket costs.
The donut hole also affects your planning. If you know you will hit the donut hole, you might want to talk to your doctor about whether generic versions of your drugs are available, or whether you can time refills to spread costs across two calendar years.
How to track your spending and know when you enter the donut hole
Your Part D plan sends you an Explanation of Benefits (EOB) after each prescription is filled. This document shows what your plan paid, what you paid, and your running total toward the donut hole and the $2,000 cap. Keep these documents or check your plan's online portal to watch your spending.
Many plans also send a notice when you are getting close to the donut hole or when you enter it. If you do not receive one, you can call your plan directly and ask where you stand. Your plan's customer service number is on your insurance card.
Tracking matters because once you know you are in the donut hole, you can talk to your doctor or pharmacist about lower-cost alternatives, or you can plan to reach the $2,000 cap as quickly as possible so catastrophic coverage begins.
Changes to the donut hole from previous years
The donut hole has been shrinking for years. In 2010, when the Affordable Care Act first addressed it, people in the gap paid 100 percent of drug costs. By 2020, that had dropped to 25 percent coinsurance. In 2024, the gap still exists but with manufacturer discounts and plan coverage, many people pay less than the stated percentage.
The 2025 changes are the biggest shift yet because they introduce a hard spending cap. Before 2025, you could theoretically spend unlimited amounts in the donut hole if your drugs were expensive enough. Now, $2,000 is the maximum you will pay in a year, regardless of how much your drugs cost or how long you are in the gap.
What to do if your current plan does not work well in 2025
The new $2,000 cap and $35 insulin copay may change which plan is best for you. A plan that was expensive in 2024 might be cheaper in 2025 because of the spending cap. A plan that was good for you might no longer be the best choice if your drug list or costs have changed.
You can change your Part D plan during the Annual Enrollment Period, which runs from October 15 to December 7 each year. During this time, you can switch to a different plan with no penalty. If you miss this window, you cannot change plans until the next year unless you have a may have access to life event (like moving to a new state or losing other drug coverage).
To compare plans, use the Medicare Plan Finder tool on Medicare.gov, or call 1-800-MEDICARE to speak with someone who can walk you through your options. Bring a list of your current drugs and dosages so you can see how much each plan would cost you.
Frequently Asked Questions
Does the $2,000 cap include my deductible?
Yes. Your deductible, copayments, and coinsurance all count toward the $2,000 annual out-of-pocket maximum. Once you have paid $2,000 total in a calendar year, you move to catastrophic coverage and your plan covers most of the cost.
If I take insulin, do I still have to pay anything in 2025?
You will pay up to $35 per month per insulin product. This is a copayment, not a coinsurance, so it is a flat amount rather than a percentage of the drug cost. The $35 counts toward your $2,000 annual cap.
What happens to my donut hole coverage if I switch plans in 2025?
Your spending resets if you switch plans. The new plan will track your spending separately starting from the date your coverage begins. Any spending you had with your old plan does not carry over, so you will start fresh with the new plan's deductible and donut hole thresholds.
Can I appeal if my plan charges more than $35 for insulin?
You should contact your plan first and ask them to explore the $35 copay cap. If they refuse, you can file a complaint with Medicare by calling 1-800-MEDICARE or visiting Medicare.gov. Plans are required to follow the $35 cap rule.
Does the donut hole cap explore to brand-name drugs if a generic is available?
The $2,000 cap applies to all covered drugs, whether brand-name or generic. However, if you choose a brand-name drug when a generic is available, your plan may charge you the difference in cost, and that difference may not count toward your $2,000 cap. Ask your plan about this before filling a brand-name prescription.