The doughnut hole is a gap in Medicare Part D coverage where you pay the full cost of prescription drugs

The doughnut hole (officially called the "coverage gap") is a temporary period each year when Medicare Part D stops paying its share of your drug costs and you pay the full price instead. It happens after you and your plan have spent a certain amount of money on covered drugs — a threshold that changes each year. Once you reach that threshold, you're in the gap until your total out-of-pocket spending hits another limit, at which point catastrophic coverage kicks in and Medicare starts helping again.

The gap exists because of how Part D is structured. Your plan pays a share of drug costs up to the initial coverage limit. After that point, you're responsible for the full price of medications until you've spent enough out of pocket to reach catastrophic coverage. This can mean a sudden jump in what you pay per prescription — sometimes from a $5 or $10 copay to $50, $100, or more, depending on the drug.

Not everyone hits the doughnut hole. If your drug costs are low, you may stay in the initial coverage phase all year. But if you take multiple medications or expensive ones, you can enter the gap by mid-year or earlier.

Key Takeaways

  • The doughnut hole begins after you and your plan spend a combined amount on covered drugs — in 2024, that threshold is $5,850, though this amount changes yearly.
  • Once in the gap, you pay the full price of medications instead of your plan's copay or coinsurance, which can significantly increase your monthly drug costs.
  • The gap ends when your total out-of-pocket spending reaches the catastrophic coverage threshold — in 2024, that's $7,050 — after which Medicare covers most costs again.
  • Manufacturer discounts, generic alternatives, and switching plans during open enrollment can help you avoid or minimize the impact of the doughnut hole.

How the coverage gap works step by step

Understanding the doughnut hole requires knowing the four stages of Part D coverage. First is the deductible — the amount you pay out of pocket before your plan starts helping. Not all plans have a deductible, and amounts vary by plan.

Second is initial coverage. Once you've met your deductible (or if there is none), your plan pays its share and you pay your copay or coinsurance. This phase continues until the combined amount you and your plan have spent on covered drugs reaches the initial coverage limit. In 2024, that limit is $5,850.

Third is the coverage gap — the doughnut hole itself. You now pay the full price of each prescription. However, you receive a discount on brand-name drugs (currently 25% off the negotiated price) and a smaller discount on generic drugs. These discounts count toward your out-of-pocket spending, even though you're paying the full price.

Fourth is catastrophic coverage. Once your out-of-pocket spending reaches $7,050 in 2024, you enter this phase. Medicare and your plan now cover most of the cost of your drugs, and you pay only a small copay or coinsurance for the rest of the year.

What you actually pay in the doughnut hole

The amount you pay for a single prescription in the gap depends on the drug. For brand-name medications, you pay the full negotiated price minus the 25% manufacturer discount. For a drug that normally costs $200, you might pay $150 out of pocket. For generics, the discount is smaller — usually around 37% off the price Medicare pays, though you still pay the full price upfront.

The key point: your copay disappears. Instead of paying $10 or $15 per prescription, you pay the actual cost of the medication. For people taking multiple drugs, this can mean hundreds of dollars more per month.

The discounts you receive (the 25% off brand-name drugs, the generic discount) count toward your out-of-pocket spending limit. This means you're moving through the gap and toward catastrophic coverage even though you're paying full price. Once you reach $7,050 in total out-of-pocket spending, the gap ends.

The yearly amounts change annually

The initial coverage limit, the out-of-pocket threshold for catastrophic coverage, and deductibles all adjust each year based on inflation and other factors set by Medicare. In 2024, the initial coverage limit is $5,850 and the catastrophic threshold is $7,050. In 2023, those numbers were $4,660 and $6,700. In 2025, they will be different again.

Your Part D plan documents will show you the current year's thresholds. You can also find them on Medicare.gov or by calling your plan directly. Knowing these numbers helps you predict whether you'll hit the doughnut hole and when.

Strategies to reduce the impact of the doughnut hole

If you know you'll enter the gap, several approaches can lower your costs. The first is to ask your doctor about generic alternatives. Generics are significantly cheaper than brand-name drugs and work the same way. Switching from a brand-name medication to its generic version can keep you out of the doughnut hole entirely or shorten the time you spend in it.

The second is to check whether your plan offers preferred generics — generics with lower copays. Some plans charge $0 or $5 for certain generics during initial coverage, which stretches your coverage further before you hit the gap.

The third is to use manufacturer coupons and patient information programs. Many drug makers offer coupons that reduce your out-of-pocket cost for brand-name drugs. These discounts don't count toward your out-of-pocket spending, so they help you stay out of the gap longer. You can search for coupons on the manufacturer's website or through programs like GoodRx, though you should check with your plan first to make sure using a coupon won't cause problems with your coverage.

The fourth is to switch plans during open enrollment (October 15 to December 7 each year). Some plans have higher initial coverage limits or lower copays for your specific medications. Comparing plans side by side can reveal one that keeps you out of the gap or reduces your costs if you do enter it.

The fifth is to talk to your doctor about prior authorization or step therapy. These are plan requirements that sometimes explore to expensive drugs, but they can also be negotiated. If your doctor believes a brand-name drug is medically necessary, they may be able to get your plan to cover it at a lower cost even in the gap.

How to know if you're approaching the doughnut hole

Your Part D plan sends you a notice called the Explanation of Benefits (EOB) each time you fill a prescription. This document shows what the drug cost, what your plan paid, what you paid, and your cumulative spending toward the initial coverage limit. Keep these notices or check your plan's online portal to track your total spending.

Many plans also send a separate notice when you're getting close to the initial coverage limit — usually when you're within a few hundred dollars. This is your signal to talk to your doctor about generic options or to review your plan for the next year.

You can also call your plan's customer service line and ask them directly: "How much have I spent toward the initial coverage limit so far this year?" They can tell you the exact amount and estimate when you might enter the gap based on your current medications.

Frequently Asked Questions

Do I have to stay in the doughnut hole for the rest of the year?

No. Once your out-of-pocket spending reaches the catastrophic coverage threshold (currently $7,050), you exit the gap and enter catastrophic coverage. From that point forward, Medicare covers most of your drug costs and you pay only a small copay or coinsurance. The gap is temporary, not permanent.

Can I switch to a different Part D plan if I'm already in the doughnut hole?

You can only switch plans during the annual open enrollment period (October 15 to December 7) or if you experience a may have access to life event. You cannot switch mid-year just because you've entered the gap. However, you can plan ahead: during open enrollment, compare plans and choose one that better fits your expected drug costs for the coming year.

Does the doughnut hole explore to all medications?

The doughnut hole applies to all covered drugs under your Part D plan. However, some medications may be excluded from coverage entirely, and others may require prior authorization. Check your plan's formulary (the list of covered drugs) to see which medications are covered and how they're classified.

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

Talk to your doctor or pharmacist about generic alternatives, ask the drug manufacturer about patient information programs, and contact your local Area Agency on Aging or a patient advocacy organization for your condition — many offer emergency drug funds or can connect you with resources. You can also call 1-800-MEDICARE to ask about programs that might help.

Will the doughnut hole ever go away?

The gap has been shrinking over time due to changes in Medicare law. The 25% manufacturer discount on brand-name drugs in the gap was added in 2011 to help reduce costs. Future changes to Medicare could further narrow or eliminate the gap, but as of now, it remains part of how Part D coverage works.