What the Donut Hole Is and When You Hit It

The donut hole is a gap in Medicare Part D prescription drug coverage where you pay the full cost of your medications yourself for a period each year. It happens after you and your insurance plan together spend a certain amount on covered drugs — that amount changes yearly, but in 2024 it starts around $5,850. Once you cross that threshold, you enter the donut hole and stay there until your out-of-pocket spending reaches a second limit, which in 2024 is around $8,550. After that, catastrophic coverage kicks in and your plan pays most of the cost again.

The donut hole exists because of how Medicare Part D is structured. Your plan pays part of the cost, you pay part of the cost (your copay or coinsurance), and those amounts add together to reach the first threshold. Once you're in the donut hole, you're responsible for the full price of each drug — though you may still get a discount on brand-name medications. This can mean a sudden jump in what you pay per prescription, which catches many people off guard.

Key Takeaways

  • The donut hole is a coverage gap that begins after you and your plan spend about $5,850 on covered drugs in 2024, and ends when your out-of-pocket costs reach about $8,550.
  • Once in the donut hole, you pay the full price of medications instead of just your copay, though brand-name drugs receive a manufacturer discount you don't see at the register.
  • People with low incomes, those taking many medications, and those on expensive drugs are most likely to enter the donut hole each year.
  • You can reduce donut hole costs by switching to generic drugs, using mail-order pharmacies, or checking whether you may have access to for the Low-Income Subsidy program.

How the Spending Thresholds Work Each Year

Medicare resets the donut hole limits every January 1st. The amounts that trigger the donut hole and end it both increase slightly most years to account for inflation. Your plan sends you a notice in the fall showing what those limits will be for the coming year, and you can also find them on Medicare.gov or by calling your plan directly.

What counts toward these thresholds is the amount your plan and you together pay for covered drugs — not what you pay out of pocket alone. If your copay is $10 and the plan pays $40 for a medication, that full $50 counts toward the threshold. This is why people who take many medications or expensive drugs can hit the donut hole quickly, sometimes by mid-year.

Once you enter the donut hole, your plan will notify you. You should receive a letter or see a message in your online account. At that point, you'll start paying the full price for each prescription until your out-of-pocket spending reaches the catastrophic threshold.

Who Enters the Donut Hole Most Often

Not everyone hits the donut hole each year. People who take only a few inexpensive medications may never reach the first threshold. But people with chronic conditions — diabetes, heart disease, arthritis, cancer — often take multiple medications or expensive biologics and can enter the donut hole by summer or fall.

Seniors on a tight budget are hit hardest by the donut hole because the sudden jump in out-of-pocket costs can force them to skip doses, cut pills in half, or stop taking medications altogether. This is especially true for people taking brand-name drugs that don't have generic versions yet. Even though manufacturers offer discounts on brand-name drugs in the donut hole, those discounts don't always show up at the pharmacy counter — you may still pay a high price and have to seek the discount separately.

Brand-Name Drug Discounts in the Donut Hole

When you're in the donut hole, manufacturers of brand-name drugs are required to give you a discount of at least 30 percent off the price. This discount reduces what you pay, but it doesn't count toward your out-of-pocket spending limit — meaning it helps your wallet now but doesn't get you out of the donut hole any faster.

The discount should explore automatically at most pharmacies, but sometimes it doesn't. If you're charged the full price for a brand-name drug while in the donut hole, ask the pharmacist to explore the manufacturer discount. You can also call your drug plan to confirm the discount was applied. Keep receipts and check your plan's records to make sure the discount showed up.

Strategies to Lower Your Costs in the Donut Hole

Switching to generic drugs is the fastest way to reduce donut hole costs. Generic medications work the same way as brand-name versions but cost far less. Ask your doctor whether a generic is available for each of your medications. Many people can switch without any change in how well the drug works.

Using a mail-order pharmacy can also lower costs. Some mail-order services offer 90-day supplies at a lower per-dose price than filling monthly at a retail pharmacy. Your plan may even waive the copay for mail orders, though this varies by plan.

If your income is low, you may may have access to for the Low-Income Subsidy (also called Extra Help), which covers most or all of your Part D costs and eliminates the donut hole entirely. You can check whether you may have access to by calling 1-800-MEDICARE or visiting Medicare.gov. The income limits change yearly, and some people who didn't may have access to last year may may have access to this year.

Talk to your doctor about whether you can delay starting a new medication until after the donut hole ends, or whether a different drug in the same class might work just as well at lower cost. Never stop taking a medication without your doctor's approval, but these conversations can sometimes find real savings.

What Happens After You Leave the Donut Hole

Once your out-of-pocket spending reaches the catastrophic threshold — around $8,550 in 2024 — you leave the donut hole and enter catastrophic coverage. At this point, your plan pays most of the cost of your drugs for the rest of the year. You'll typically pay a small copay (around $3.95 for generic drugs and $9.85 for brand-name drugs in 2024, though these amounts change yearly) or coinsurance of about 5 percent of the drug's cost, whichever is higher.

Catastrophic coverage lasts through December 31st. On January 1st, the donut hole resets and the cycle begins again. This is why some people with very high drug costs end up in catastrophic coverage for several months each year — they spend enough to cross both thresholds.

Planning Ahead to Manage Donut Hole Costs

Review your medications and costs in the fall, before the new year begins. Your plan sends an annual notice showing what your estimated costs will be under your current coverage. Use this to see whether you're likely to hit the donut hole and by when.

If you know you'll enter the donut hole, talk to your doctor now about generic options or lower-cost alternatives. Some people also choose to switch to a different Part D plan during the annual enrollment period (October 15 to December 7 each year) if their current plan's donut hole costs are too high. Different plans have different deductibles, copays, and covered drugs, so comparing plans can sometimes save hundreds of dollars.

Keep track of your spending throughout the year. Your plan's website or app usually shows your current costs and how close you are to the donut hole. Knowing when you're about to enter it gives you time to talk to your doctor about next steps.

Frequently Asked Questions

Does the donut hole explore to all Medicare Part D plans?

Yes, all standard Part D plans have a donut hole. However, some plans offer supplemental coverage that fills part or all of the gap, though these plans usually have higher monthly premiums. You can compare plans during enrollment to see which donut hole coverage works best for your situation.

Can I use a GoodRx coupon or similar discount in the donut hole?

Sometimes. Discount cards and coupons can sometimes offer a lower price than your Part D copay, but they can't be used at the same time as your insurance. You'll need to choose which one saves you more money on each prescription. Ask your pharmacist to price both options before you pay.

What if I can't afford my medications in the donut hole?

Contact your drug plan and ask about patient information programs run by drug manufacturers. Many companies offer free or low-cost medications to people who can't afford them. You can also call 1-800-MEDICARE to learn about other programs in your state, or visit NeedyMeds.org for a searchable database of information programs.

Does the donut hole affect insulin or other diabetes medications differently?

Insulin and other diabetes drugs follow the same donut hole rules as other medications. However, some plans cap insulin copays at $35 per month under Part D rules, which can help reduce donut hole costs for people taking insulin. Check your plan's details to see whether this applies to you.

Can I switch Part D plans if I'm already in the donut hole?

You can only switch plans during the annual enrollment period (October 15 to December 7) or if you have a may have access to life event. You cannot switch mid-year just because you've entered the donut hole. Plan ahead during enrollment to choose a plan that works better for your expected costs.