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 plan have spent a certain amount on covered drugs in a single year, and it ends when your out-of-pocket costs reach a higher limit. Once you cross into the donut hole, your copay or coinsurance jumps dramatically — you might go from paying $10 per prescription to paying 25% of the drug's full price, which can be $50, $100, or more per medication.

The donut hole exists because Medicare Part D has four distinct payment stages each year. You start in the initial coverage stage, where your plan pays most of the cost. Once combined spending (what you and your plan pay together) hits a threshold — $5,850 in 2024, though this amount changes yearly — you enter the donut hole. You stay there until your own out-of-pocket costs reach $8,550 in 2024. After that, catastrophic coverage kicks in and your costs drop again.

Many seniors do not realize they have entered the donut hole until they pick up a prescription and the price is shockingly high. This often happens mid-year, when you have already used up your plan's initial coverage. The impact is real: people skip doses, cut pills in half, or stop taking medications altogether because they cannot afford the full price.

Key Takeaways

  • The donut hole begins when your plan's total drug spending reaches $5,850 in 2024, and you pay full price until your out-of-pocket costs hit $8,550.
  • Inside the donut hole, you typically pay 25% of the drug's full price instead of a small copay, which can mean paying $50 to $150 per prescription.
  • Manufacturer discounts and generic alternatives can lower your costs while in the donut hole, and some plans offer additional coverage that shrinks or eliminates the gap.
  • You can track your spending through your plan's website or by calling the plan directly to know when you are approaching or inside the donut hole.
  • Once your out-of-pocket costs reach the catastrophic threshold, Medicare covers 95% of drug costs for the rest of the year.

How the donut hole affects what you pay

During the initial coverage stage, you pay a copay (a flat fee like $10) or coinsurance (a percentage like 20%) for each prescription. Your plan pays the rest. This stage lasts until the total amount spent on your drugs — your share plus your plan's share — reaches $5,850 in 2024. That $5,850 includes what you paid out of pocket and what your insurance company paid on your behalf.

Once you hit $5,850 in combined spending, you enter the donut hole. Now you pay 25% of the full price of brand-name drugs and 25% of the full price of generic drugs. If a brand-name medication costs $200, you pay $50. If a generic costs $40, you pay $10. This is why the jump can feel so steep — you go from a $10 copay to paying a quarter of the actual drug price, which is often much higher.

You stay in the donut hole until your own out-of-pocket spending reaches $8,550 in 2024. Only the money you personally paid counts toward this limit — not what your insurance company paid. Once you cross $8,550, you move into catastrophic coverage, where Medicare covers 95% of your drug costs and you pay only 5% for the rest of the calendar year.

When you are most likely to hit the donut hole

Seniors who take multiple medications or expensive drugs are most likely to enter the donut hole. If you take three or four chronic disease medications, especially brand-name drugs, you can reach $5,850 in combined spending by mid-year or earlier. People managing conditions like heart disease, diabetes, or arthritis with multiple prescriptions often find themselves in the gap by summer.

The timing matters because once you are in the donut hole, you have months of higher costs ahead. If you hit it in March, you face nine months of 25% coinsurance. If you hit it in November, you only have one month before catastrophic coverage begins and costs drop again. This is why some seniors try to time refills or switch to lower-cost alternatives before they know they will enter the donut hole.

People taking just one or two inexpensive medications may never reach the $5,850 threshold in a year. Those taking one expensive specialty drug — such as a biologic for rheumatoid arthritis or a cancer medication — might hit it in a single month.

Ways to reduce costs in the donut hole

Manufacturer discounts can help significantly. Many drug makers offer coupons or patient information programs that lower the price you pay at the pharmacy. These discounts count toward your out-of-pocket spending limit, so they help you move through the donut hole faster and reach catastrophic coverage sooner. Ask your pharmacist whether a discount program exists for each of your medications.

Generic drugs are almost always cheaper than brand-name versions, and the price difference is even more important inside the donut hole. If you are paying 25% coinsurance, a $200 brand-name drug costs you $50, but a $40 generic costs you $10. Talk to your doctor about whether a generic version exists for each of your medications and whether it would work as well for you.

Some Medicare Advantage plans and standalone Part D plans offer additional coverage that reduces or eliminates the donut hole. These plans may cover certain drugs at a lower cost while you are in the gap, or they may have a smaller donut hole than the standard Medicare plan. When you enroll in Part D or during the annual open enrollment period, compare plans specifically on how they handle the donut hole — it can save you hundreds of dollars.

Switching to a different Part D plan during open enrollment (October 15 to December 7 each year) is another option. A plan that covers your specific drugs more generously during the donut hole stage might cost more in premiums but save you money overall if you know you will hit the gap.

Tracking your spending to know when you enter the donut hole

Your Part D plan is required to send you a notice when you reach the donut hole. However, you do not have to wait for that notice — you can track your spending yourself. Log into your plan's website and look for a section called "Spending" or "Coverage Information." Most plans show your year-to-date spending in both the combined total (what you and the plan paid together) and your out-of-pocket costs.

You can also call your plan's customer service number, which is on your insurance card. Tell them you want to know your current spending toward the donut hole and how much more you need to spend before you enter the gap. They can give you an exact dollar amount and tell you which of your medications are counting toward that limit.

Knowing your spending helps you plan ahead. If you are close to $5,850, you might ask your doctor whether you can delay a non-urgent refill until after you hit the donut hole, or whether a generic alternative makes sense. If you are already in the donut hole, you can prioritize which medications to refill first and look for manufacturer discounts on the most expensive ones.

What happens after the donut hole ends

Once your out-of-pocket costs reach $8,550 in 2024, you enter catastrophic coverage. At this point, Medicare covers 95% of your drug costs and you pay only 5%. This is the lowest cost stage of the year. If a drug costs $100, you pay $5. If it costs $500, you pay $25.

Catastrophic coverage lasts through December 31. On January 1, the cycle resets and you start back in the initial coverage stage with a new $5,850 threshold. This means that if you hit catastrophic coverage in December, you only benefit from it for a few weeks before the year ends and your costs jump back up in January.

The dollar amounts for the donut hole and catastrophic thresholds change every year. In 2025, the initial coverage threshold will be higher than $5,850, and the catastrophic threshold will be higher than $8,550. Your plan will notify you of the new amounts in October or November of the previous year.

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 Medicare Advantage plans that include drug coverage (Part D) may offer additional coverage that reduces or eliminates the gap. When you compare plans, check whether they cover drugs differently during the donut hole stage.

If I switch plans during the year, does my spending reset?

No. Your spending counts toward the donut hole threshold regardless of which plan you are in. If you have spent $4,000 with one plan and switch to a different plan, that $4,000 still counts. Your new plan will see your spending history and know how much more you need to spend before entering the donut hole.

Can I do anything to avoid the donut hole?

You cannot avoid it if you take expensive or multiple medications, but you can reduce its impact. Choosing a plan with better donut hole coverage, using generic drugs, and taking advantage of manufacturer discounts all help. Some people also time refills to spread spending across two calendar years, though this only works if your doctor agrees it is safe.

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

Talk to your doctor and pharmacist when ready. They can help you find manufacturer discounts, switch to generics, or explore patient information programs. Your local Area Agency on Aging or a Medicare counselor can also help you understand your options and find resources in your community.

Does the donut hole amount change every year?

Yes. The $5,850 initial coverage threshold and $8,550 out-of-pocket threshold are adjusted annually based on inflation. Your plan will send you updated amounts in the fall before the new year begins. Check your plan's materials or website to see the current year's thresholds.