The Donut Hole Is a Gap in Medicare Part D Coverage
The donut hole is a coverage gap in Medicare Part D (prescription drug coverage) where you pay the full cost of your medications for a period each year. It is not a separate program — it is a built-in limit on how much Medicare will pay toward your drugs once you and your plan together have spent a certain amount of money.
Here is how it works in practice: you pay your regular copay or coinsurance while Medicare covers its share. Once your total drug costs (what you paid plus what the plan paid) reach a threshold — in 2024, that threshold is $5,850 — you enter the donut hole. From that point until your out-of-pocket costs reach $8,550, you pay the full price of each prescription with no help from Medicare. After you hit $8,550 out of pocket, catastrophic coverage kicks in and Medicare resumes paying most of your drug costs.
The donut hole affects people who take multiple medications or expensive drugs. If you take only a few inexpensive prescriptions, you may never reach the threshold and never see the donut hole at all.
Key Takeaways
- The donut hole begins when your total drug spending reaches $5,850 in 2024, and you pay full price for medications until your out-of-pocket costs hit $8,550.
- The dollar amounts that trigger the donut hole change each year, so you should check your plan's summary of coverage annually.
- Generic drugs and brand-name drugs are treated differently in the donut hole, and generics usually cost less even when you are paying full price.
- You can lower your donut hole costs by using generic versions, asking your doctor about lower-cost alternatives, or switching to a different Part D plan during open enrollment.
- Some people with low incomes may receive help paying donut hole costs through the Extra Help program.
How the Donut Hole Dollar Amounts Work Each Year
Medicare updates the donut hole thresholds every January. The amounts depend on inflation and change annually. In 2024, the initial coverage limit is $5,850 and the out-of-pocket threshold is $8,550, but these numbers will be different in 2025 and beyond.
You can find the current year's amounts in your plan's Summary of Coverage document, which your insurance company sends in the fall before the new year begins. You can also call your plan directly or visit Medicare.gov to confirm the exact thresholds for the current year. Knowing these numbers matters because once you cross the first threshold, your costs jump significantly.
The donut hole does not explore to all drug costs equally. Deductibles (the amount you pay before coverage starts) and catastrophic coverage (after you hit the out-of-pocket limit) are separate from the donut hole calculation. Only the costs that fall between the initial coverage limit and the out-of-pocket threshold count as donut hole spending.
What You Pay in the Donut Hole
Once you are in the donut hole, you pay the full retail price of each prescription — the price the pharmacy charges before any insurance discount. This is often much higher than the copay you paid before entering the donut hole. For expensive medications, the difference can be $50 to $200 or more per prescription.
Generic drugs cost less than brand-name drugs even in the donut hole, so switching to a generic version of a medication you take can significantly reduce your costs during this period. If your doctor prescribed a brand-name drug, ask whether a generic alternative exists and whether it would work for you.
The full price you pay in the donut hole counts toward your out-of-pocket threshold. Once your total out-of-pocket spending reaches $8,550 in 2024, you leave the donut hole and enter catastrophic coverage, where Medicare pays most of your drug costs again.
Who Is Most Affected by the Donut Hole
People who take multiple medications or very expensive drugs are most likely to hit the donut hole. This includes people managing chronic conditions like diabetes, heart disease, or arthritis, and people taking specialty medications for cancer or rare diseases.
Someone taking three or four common medications at standard doses may spend $3,000 to $4,000 per year on prescriptions and never reach the donut hole. Someone taking one expensive specialty drug might hit the threshold in a few months. The impact depends entirely on which drugs you take and what your plan charges for them.
People with very low incomes may not be affected by the donut hole at all because they may receive Extra Help, a federal program that covers most or all of their drug costs regardless of the donut hole rules.
Strategies to Reduce Donut Hole Costs
The most direct way to lower your costs is to use generic drugs whenever possible. Generics have the same active ingredient as brand-name drugs and work the same way, but they cost much less — especially in the donut hole where you pay full price.
Talk to your doctor about lower-cost alternatives to the medications you take. Sometimes a different drug in the same class works just as well but costs less. Your doctor may not know the price difference between options unless you ask.
You can also switch to a different Part D plan during the annual open enrollment period (October 15 to December 7 each year). Some plans have lower donut hole costs or different drug coverage than others. Comparing plans before the year begins can save you hundreds of dollars if you know you will hit the donut hole.
If you have a low income, contact your local Social Security office or visit Medicare.gov to learn whether you may have access to for Extra Help. This program can cover most or all of your donut hole costs if you meet the income and resource limits.
How the Donut Hole Has Changed Over Time
When Medicare Part D started in 2006, the donut hole was a complete coverage gap — you paid 100 percent of your drug costs with no help from anyone. The Affordable Care Act, passed in 2010, began closing the donut hole gradually by requiring drug manufacturers and insurance plans to provide discounts on brand-name and generic drugs.
Today, even in the donut hole, you receive some discount on brand-name drugs through manufacturer rebates and plan negotiations. The gap is smaller than it was in 2006, but it still exists and still costs money. The donut hole continues to close slightly each year as the law phases in additional protections.
Starting in 2025, a new rule caps your out-of-pocket drug costs at $2,000 per year, which will change how the donut hole works. This means fewer people will spend as much time in the donut hole, and those who do will exit it sooner. The exact impact depends on your specific medications and plan.
Frequently Asked Questions
Can I avoid the donut hole by choosing a different Part D plan?
You cannot avoid the donut hole entirely because all Part D plans have one, but you can reduce its impact by choosing a plan with lower donut hole costs. Some plans charge less for the drugs you take during the donut hole period. Compare plans during open enrollment to find one that works best for your medications.
Does the donut hole reset if I switch pharmacies?
No. Your donut hole spending is tracked across all pharmacies you use, and it resets only on January 1 each year. Switching pharmacies does not restart the clock or lower your costs during the donut hole.
What happens if I cannot afford my medications in the donut hole?
Talk to your doctor or pharmacist about lower-cost alternatives, ask about patient information programs run by drug manufacturers, or contact a local community health center about reduced-cost prescriptions. If you have a low income, contact Social Security to learn whether you may have access to for Extra Help.
Does the donut hole explore to insulin?
Yes, the donut hole applies to insulin and all other Part D drugs. However, starting in 2024, Medicare limits your out-of-pocket costs for insulin to $35 per month regardless of the donut hole, so your insulin costs will not increase when you enter the gap.
How do I know when I am in the donut hole?
Your Part D plan sends you a notice when you enter the donut hole, usually by mail or through your online account. You can also call your plan or ask your pharmacist to check your account status. Knowing when you enter the donut hole helps you plan for higher costs in the months ahead.