What the Donut Hole Is and When It Kicks In

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 feature of how Part D works that affects most people who take multiple medications.

Here is how it works in sequence: you pay your monthly Part D premium year-round. Once you and your plan together spend a set amount on covered drugs — in 2024, that threshold is $5,850 — you enter the donut hole. While you are in the donut hole, you pay a larger share of the cost of each prescription until your out-of-pocket spending reaches a second limit (in 2024, that limit is $7,050). After you cross that second limit, catastrophic coverage kicks in and your costs drop again.

The donut hole exists because Part D is structured in layers, not as a flat percentage. Most people do not notice it until they reach it, because the jump in what you owe per prescription can be sudden.

Key Takeaways

  • The donut hole is a coverage gap where you pay the full price of medications after you and your plan spend $5,850 together on covered drugs in 2024.
  • Once your own out-of-pocket costs reach $7,050 in 2024, catastrophic coverage begins and your costs drop to a small copay or coinsurance amount.
  • The dollar amounts that trigger the donut hole and end it change each year, so check your plan's summary of benefits annually.
  • Generic drugs and brand-name drugs are affected differently — generics usually cost less in the donut hole, which is why switching can lower your bill.
  • Some people may have access to for programs that help pay donut hole costs, including the Low-Income Subsidy and manufacturer discount programs.

How the Donut Hole Affects What You Pay

Before you enter the donut hole, your Part D plan covers a percentage of your drug costs — typically 75 percent for brand-name drugs and generics, though this varies by plan. You pay the rest as a copay or coinsurance. Your plan's contribution counts toward the $5,850 threshold, and so does your copay.

Once you enter the donut hole, your plan stops paying its share. You now pay the full negotiated price of each drug. For a brand-name medication that normally costs $200 with your plan covering most of it, you might suddenly owe $150 or more per prescription. This is where many people's monthly drug costs spike noticeably.

The donut hole lasts until your own out-of-pocket spending — not your plan's spending — reaches $7,050 in 2024. Only what you personally pay counts toward this limit. Once you cross it, you move into catastrophic coverage, where your plan picks up most of the cost again and you pay only a small copay (usually $3.95 to $9.85 per prescription, depending on the drug type).

The Thresholds Change Every Year

The dollar amounts that define the donut hole are adjusted annually for inflation. In 2024, the initial coverage limit is $5,850 and the out-of-pocket threshold is $7,050. In 2023, those numbers were $5,030 and $6,550. In 2025, they will be different again.

Your Part D plan's annual summary of benefits will show you the current year's thresholds. You can also find them on Medicare.gov or by calling your plan directly. Knowing the exact numbers matters because it helps you predict when you might enter the donut hole and plan your medication refills accordingly.

Some people reach the donut hole in summer or fall; others never reach it because their annual drug costs stay below the threshold. If you take expensive medications or multiple prescriptions, you are more likely to enter it.

Who Pays Less or Nothing in the Donut Hole

Not everyone pays full price in the donut hole. If you have a low income and limited resources, you may may have access to for the Low-Income Subsidy (LIS), also called "Extra Help." This program covers most or all of your Part D costs, including donut hole costs, and eliminates the coverage gap for you entirely. You must meet income and asset limits set by Social Security.

Even if you do not may have access to for LIS, drug manufacturers often offer discount programs for brand-name medications during the donut hole. These discounts can reduce what you owe at the pharmacy. Your pharmacist can tell you whether a discount program exists for your specific medication, or you can check the manufacturer's website.

Some Part D plans also offer supplemental coverage that helps pay donut hole costs, though these plans usually charge a higher monthly premium. When you are choosing a plan during open enrollment, compare not just the premium but also what happens in the donut hole — some plans are designed to be cheaper once you enter it.

Strategies to Reduce Donut Hole Impact

If you know you will enter the donut hole, you have several options. The most direct is to ask your doctor whether a generic version of your medication is available. Generics cost significantly less than brand-name drugs, and the savings are especially large in the donut hole. Switching from a brand-name drug to its generic can cut your out-of-pocket costs by 50 percent or more.

Another strategy is to time your refills. If you are approaching the donut hole threshold, you might refill prescriptions before you enter it, when your plan is still covering its share. This works only if your plan allows early refills and if you have storage space for extra medication. Talk to your pharmacist about what is possible.

You can also shop for a different Part D plan during the annual open enrollment period (October 15 to December 7). Some plans have lower donut hole costs than others. Medicare.gov has a plan comparison tool that shows you estimated costs for your specific medications under each available plan.

How to Know If You Are in the Donut Hole

Your Part D plan sends you a notice called the "Explanation of Benefits" (EOB) each time you fill a prescription. This notice shows how much the plan paid, how much you paid, and your cumulative spending toward the donut hole threshold. Once your combined spending reaches the initial coverage limit, your next prescription will show a sharp jump in what you owe — that is when you know you have entered the donut hole.

You can also track your spending yourself by keeping a running total of what you and your plan pay for each prescription. Many pharmacies and insurance plans also offer online portals where you can see your year-to-date spending in real time.

If you are unsure whether you are in the donut hole, call your Part D plan's customer service number. They can tell you your exact spending to date and how much more you need to spend before catastrophic coverage begins.

Frequently Asked Questions

Does everyone with Part D hit the donut hole?

No. The donut hole only affects people whose total drug costs reach the annual threshold. If your medications cost less than $5,850 combined (what you and your plan pay together) in a year, you never enter the donut hole. People who take few medications or only inexpensive generics often stay below the threshold.

Can I switch plans if I am already in the donut hole?

You cannot switch Part D plans mid-year unless you may have access to for a special enrollment period (such as a change in income or loss of coverage). However, you can switch during the annual open enrollment period in October and November, and your new plan's coverage would begin January 1 of the next year. The donut hole resets each January.

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

Contact your plan about manufacturer discount programs for your specific drugs. If you have a low income, look into the Low-Income Subsidy through Social Security. You can also ask your doctor about lower-cost alternatives or whether a generic version is available. Some community health centers and nonprofits also offer medication information programs.

Does the donut hole exist in Medicare Advantage plans?

Medicare Advantage plans (Part C) that include drug coverage have their own cost structure and may or may not have a donut hole. Some do; some do not. Check your plan's summary of benefits to see whether a coverage gap applies to you.

When does the donut hole reset?

The donut hole resets on January 1 each year. Your spending from 2024 does not carry over to 2025. This means if you enter the donut hole late in the year, you will start fresh in January with a new threshold to reach.