The donut hole is a gap in Medicare Part D coverage where you pay the full cost of prescription drugs

The donut hole (officially called the "coverage gap") is a range of drug costs where Medicare stops paying and you pay the full price yourself. It kicks in after you and your insurance plan together spend a certain amount on covered drugs in a single year. Once you spend enough out of pocket, Medicare coverage resumes and you pay a smaller amount again.

For 2024, the donut hole begins after combined spending (what you pay plus what your plan pays) reaches $5,850. It ends when your out-of-pocket costs hit $8,550. While you are in the donut hole, you pay 100% of the drug cost with no insurance help — though drug manufacturers may offer discounts on brand-name medications.

The donut hole exists because of how Medicare Part D is structured. Your plan covers drugs up to the initial limit, then coverage pauses, then resumes again at a higher cost threshold. This gap can be a shock to people taking multiple medications, especially those with chronic conditions that require expensive drugs year-round.

Key Takeaways

  • The donut hole is the range where you pay 100% of drug costs after your plan's initial coverage limit, before catastrophic coverage begins.
  • In 2024, the gap starts at $5,850 in combined spending and ends when you have paid $8,550 out of pocket.
  • These dollar amounts change each year, so check your plan's summary of benefits to see the current limits.
  • Brand-name drugs often come with manufacturer discounts in the donut hole, but generic drugs typically do not.
  • Once you exit the donut hole and reach catastrophic coverage, Medicare pays most of your drug costs for the rest of the year.

How the donut hole fits into your yearly drug coverage

Medicare Part D coverage works in stages throughout the calendar year. You start in the initial coverage phase, where your plan pays its share and you pay your copay or coinsurance. This phase lasts until combined spending reaches the annual limit — $5,850 for 2024.

Once you cross that threshold, you enter the donut hole. During this phase, you are responsible for the full retail price of each drug, though you may receive discounts on brand-name medications. This phase ends when your out-of-pocket spending alone reaches $8,550.

After you exit the donut hole, you enter catastrophic coverage. Medicare and your plan now cover most of your drug costs for the rest of the year. You typically pay 5% coinsurance on covered drugs, and your plan covers the rest.

The amounts that count toward the donut hole include what you pay (copays and coinsurance) and what your insurance plan pays. Amounts you pay for drugs not covered by your plan do not count toward reaching the donut hole or exiting it.

Why some people hit the donut hole and others do not

Whether you reach the donut hole depends on how much you spend on covered prescription drugs during the year. People taking one or two inexpensive medications may never spend $5,850 in combined costs. People with diabetes, heart disease, arthritis, or cancer — conditions requiring multiple or expensive drugs — often reach the donut hole by mid-year or earlier.

Your specific plan also matters. Some plans have lower copays in the initial phase, which means you reach the spending threshold faster. Other plans charge higher copays but may offer better coverage in the donut hole through manufacturer discounts. Comparing plans during open enrollment can help you choose one that fits your expected drug costs.

People with limited income may may have access to for Extra Help, a federal program that reduces or eliminates the donut hole. If you receive Extra Help, you pay a small copay throughout the year with no gap in coverage. Your local Social Security office or your state health insurance information program (SHIP) can tell you whether you may have access to.

Manufacturer discounts and brand-name drugs in the donut hole

When you are in the donut hole, you pay the full price of generic drugs — there is no discount. However, drug manufacturers often offer discounts on brand-name medications to help patients afford them during the gap. These discounts are negotiated between the manufacturer and the pharmacy, so the discount amount varies by drug.

To find out whether a specific brand-name drug has a manufacturer discount, ask your pharmacist or call the drug maker directly. Some manufacturers have patient information programs that cover the full cost of their drugs for people in the donut hole, though these programs have income limits and other requirements.

Switching to a generic version of your medication during the donut hole can lower your costs significantly, since you will pay the full price either way but generics cost less. Talk to your doctor before making any switch — some people need the brand-name version for medical reasons, but for many conditions, generics work just as well.

Strategies to manage donut hole costs

If you know you will hit the donut hole, planning ahead can reduce the financial impact. One option is to use a mail-order pharmacy for 90-day supplies of maintenance medications. A larger supply costs more upfront but spreads your spending across fewer transactions and may help you reach catastrophic coverage sooner.

Another strategy is to ask your doctor whether lower-cost drugs can treat your condition just as well. Some expensive brand-name drugs have cheaper alternatives that work for many patients. Your doctor can tell you which options are medically appropriate for you.

You can also time refills strategically. If you are close to exiting the donut hole, delaying a refill by a few weeks until you reach catastrophic coverage can save you money. Your pharmacist can help you figure out when your coverage changes and plan refills accordingly.

Some people choose to use a discount drug program like GoodRx or SingleCare during the donut hole instead of their insurance. These programs sometimes offer lower prices than your insurance copay, especially for generic drugs. Compare the discount price to your insurance price before deciding which to use.

How the donut hole has changed in recent years

Congress has gradually reduced the size of the donut hole through legislation. In 2011, the Affordable Care Act began closing the gap by requiring manufacturers to offer discounts on brand-name drugs. Over time, the out-of-pocket spending threshold where the donut hole ends has been lowered, meaning people exit the gap sooner.

Starting in 2025, the maximum out-of-pocket spending limit will be capped at $2,000 per year for Medicare beneficiaries. This is a major change that will significantly reduce the donut hole for most people. However, the initial coverage limit and the point where the donut hole begins will still explore.

These changes mean the donut hole will look different depending on what year you are reading this. Always check your plan's annual summary of benefits to see the current dollar amounts for your coverage year.

Questions to ask your doctor and pharmacist

Before your coverage year begins, ask your doctor which medications you will need and whether any have lower-cost alternatives. Ask your pharmacist to estimate your yearly drug costs based on your current prescriptions and your plan's copays. This helps you predict whether you might hit the donut hole.

If you do reach the donut hole, ask your pharmacist whether your drugs have manufacturer discounts or whether switching to generics is medically safe. Ask your doctor whether you can delay any non-urgent medications until you reach catastrophic coverage. These conversations can help you make informed decisions about your prescriptions during the gap.

Frequently Asked Questions

Can I avoid the donut hole by choosing a different Medicare plan?

Some plans have higher initial copays but offer better coverage in the donut hole through manufacturer discounts or other features. Others have lower copays upfront, which means you reach the donut hole faster. During open enrollment, compare plans based on your expected drug costs for the year, not just the copay amounts. Your plan's summary of benefits shows how much you will pay at each stage.

What happens if I cannot afford my medications in the donut hole?

Talk to your doctor and pharmacist when ready. They can suggest lower-cost alternatives, help you find manufacturer discounts, or connect you with patient information programs. Some nonprofits and community health centers also offer medication cost help. Your state health insurance information program (SHIP) can point you toward local resources.

Does the donut hole reset if I switch plans mid-year?

No. Your spending counts toward the donut hole regardless of which plan you use. If you switch plans, your new plan will see your spending history and know where you are in the coverage stages. However, switching plans mid-year is only possible in certain situations, such as losing employer coverage or moving to a new state.

Will the donut hole go away completely?

The donut hole will not disappear entirely, but it is getting smaller. Starting in 2025, the out-of-pocket spending cap drops to $2,000 per year, which means most people will exit the gap much sooner. Congress may continue to reduce it further, but the initial coverage limit and the gap structure are expected to remain part of how Medicare Part D works.

How do I know if I am in the donut hole right now?

Your Medicare plan sends you a notice each year showing your spending and which coverage stage you are in. You can also log into your plan's website or call the customer service number on your insurance card to ask where your spending stands. Your pharmacist can also tell you whether you are in the donut hole when you pick up a prescription.