The Donut Hole Is a Coverage Gap in Medicare Part D Drug Plans

The donut hole (officially called the "coverage gap") is a range of drug costs where Medicare Part D stops paying its share and you pay the full price yourself. It kicks in after you and your plan have spent a combined $5,850 on covered drugs in 2024, and it ends once your out-of-pocket spending hits $8,550 for the year. Between those two numbers, you are responsible for the entire cost of your medications — not just a copay, but the actual pharmacy price.

The donut hole exists because of how Medicare Part D is structured. Your plan covers drugs up to the initial threshold, then coverage pauses, then kicks back in again once you reach catastrophic coverage. This gap was smaller in the past and has been shrinking each year, but it still affects millions of people taking multiple medications or expensive drugs.

The dollar amounts change each year. The 2024 figures above will be different in 2025 and beyond. Your plan's materials or your pharmacist can tell you the current thresholds for your coverage year.

Key Takeaways

  • The donut hole is a coverage gap where you pay the full pharmacy price for drugs after hitting $5,850 in combined spending (2024 figure), until your out-of-pocket costs reach $8,550.
  • Brand-name drugs receive a 25 percent manufacturer discount while you are in the donut hole, but generic drugs do not, making generics relatively cheaper during this period.
  • Once you exit the donut hole and reach catastrophic coverage, Medicare and your plan resume paying most of your drug costs, though you will pay a small copay or coinsurance.
  • The exact dollar thresholds change each year, so you should check your plan's annual materials or call your plan to confirm the current amounts.

How the Donut Hole Works Step by Step

Your Part D coverage has four distinct stages, and the donut hole is the third one. In the first stage, you pay your plan's standard copay or coinsurance (usually $5 to $15 per drug) and your plan pays the rest. This continues until your plan's records show that you and your plan together have spent $5,850 on covered drugs.

Once that threshold is crossed, you enter the donut hole. From that point forward, you pay the full retail price at the pharmacy — no plan payment, no copay structure. This continues until your own out-of-pocket spending (not including what your plan paid) reaches $8,550. The gap between $5,850 and $8,550 is the donut hole itself.

After you hit $8,550 in your own spending, you move into catastrophic coverage. At this stage, your plan resumes paying most of your drug costs. You will typically pay 5 percent coinsurance or a small copay, and your plan covers the rest. This catastrophic coverage continues through the end of the calendar year.

Brand-Name Drugs Get a Discount in the Donut Hole, Generics Do Not

While you are in the donut hole, drug manufacturers are required to give you a 25 percent discount on brand-name drugs. This discount is applied at the pharmacy counter, so you pay 75 percent of the brand-name price rather than the full 100 percent. The discount counts toward your out-of-pocket spending total, so it helps you move through the donut hole faster.

Generic drugs do not receive this manufacturer discount. You pay the full generic price with no reduction. Because of this, generic drugs often become the cheaper option during the donut hole, even though generics are normally cheaper than brand-name drugs anyway. Your pharmacist can tell you whether a generic version exists for any drug you take and what the out-of-pocket cost would be.

Who Hits the Donut Hole and When

Not everyone with Part D hits the donut hole. People who take only a few inexpensive drugs may never reach the $5,850 threshold. People with low incomes may may have access to for Extra Help (a federal program that covers Part D costs) and never see the donut hole at all. People with employer retiree coverage or Medicaid may have different cost structures that do not include a donut hole.

People most likely to hit the donut hole are those taking multiple medications, especially brand-name drugs or expensive biologics. Someone on three or four chronic medications can reach $5,850 by mid-year. Once you hit the donut hole in one year, you will likely hit it again the next year if your medications do not change.

You can track your progress toward the donut hole by checking your plan's online account or calling your plan's customer service. Your plan is required to send you a notice when you enter the donut hole, but you do not have to wait for that notice to start planning.

Strategies to Reduce Donut Hole Costs

Talk to your doctor about generic alternatives before you hit the donut hole. If you can switch to a generic version of a drug you take, you will save money both before and during the donut hole. Your doctor can also tell you whether a different drug in the same class might work just as well at a lower cost.

Ask your pharmacist about manufacturer coupons or patient information programs. Many drug makers offer coupons that reduce the price of brand-name drugs, and some offer free or reduced-cost drugs to people who cannot afford them. These programs exist outside Medicare and can help during the donut hole.

Consider timing large purchases strategically. If you know you will hit the donut hole in October, you might ask your doctor for a 90-day supply in September so the cost is spread across both sides of the threshold. This is not always possible, but it is worth discussing with your pharmacist.

Look into whether you may have access to for Extra Help. If your income is below 150 percent of the federal poverty line, you may be able to get Extra Help, which covers most or all of your Part D costs and eliminates the donut hole entirely. You can check your potential status through your local Social Security office or online at the Social Security website.

The Donut Hole Is Getting Smaller Over Time

Congress has been gradually reducing the donut hole since 2010. The gap used to be much wider and much more expensive for beneficiaries. Each year, the manufacturer discount on brand-name drugs has increased, and the out-of-pocket threshold has shifted. By 2025, the donut hole is significantly smaller than it was a decade ago, though it still affects millions of people.

Future changes to the donut hole depend on Congress and on changes to the Part D program itself. The Inflation Reduction Act, passed in 2022, made changes to how Medicare negotiates drug prices and how out-of-pocket costs are capped, which may affect the donut hole structure in coming years. Your plan's annual materials will reflect any changes that explore to you.

Frequently Asked Questions

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

Yes, all standard Part D plans have a donut hole. Some plans offer supplemental coverage that fills part or all of the gap, but those plans cost more in monthly premiums. You can compare plans during open enrollment to see which ones offer donut hole coverage.

What counts toward the donut hole threshold?

Only covered drugs count. Drugs on your plan's exclusion list, over-the-counter medications, and drugs you buy outside your plan do not count. Your plan's formulary (list of covered drugs) will show you which drugs count.

Can I switch plans if I hit the donut hole?

You can switch plans during the annual open enrollment period (October 15 to December 7), but not in the middle of the year just because you hit the donut hole. If you are in the donut hole now, switching plans in December will not help you this year, but it may help you next year if you choose a plan with better coverage for your drugs.

Does the donut hole reset each year?

Yes. On January 1, your spending counter resets to zero, and the donut hole thresholds explore again. Any spending you did in the donut hole in December does not carry over to the new year.

What if I cannot afford my drugs while in the donut hole?

Contact your drug manufacturer to ask about patient information programs, which may provide free or reduced-cost drugs. Ask your doctor whether a lower-cost alternative exists. Call your plan to ask about any supplemental coverage options. If you have very low income, contact your local Area Agency on Aging to learn about other programs that might help.