What the Coverage Gap Is and When It Starts

The Medicare Part D coverage gap, often called the "donut hole," is a temporary period each year when you pay more out of pocket for prescription drugs. Once you and your insurance plan together spend a certain amount on covered drugs, you enter the gap. During this time, you pay a larger share of the cost until your total out-of-pocket spending reaches a second threshold, at which point catastrophic coverage begins and your costs drop again.

The gap does not happen to everyone. It only affects people who reach the initial coverage limit. In 2024, that limit is $5,850 in total drug costs (this amount changes each year). If your prescriptions cost less than that annually, you will never enter the gap. But if you take multiple medications or expensive drugs, you may hit this threshold by mid-year or later.

Once you enter the gap, your insurance plan stops paying its usual share. Instead, you pay a percentage of the drug cost — currently 25 percent for most people — until your out-of-pocket spending reaches $8,550 (also for 2024). After that, catastrophic coverage takes over, and you pay only a small copay or coinsurance for the rest of the year.

Key Takeaways

  • The coverage gap begins after you and your plan spend $5,850 combined on covered drugs in 2024, and ends when your personal out-of-pocket costs reach $8,550.
  • During the gap, you pay 25 percent of the cost of most brand-name and generic drugs, while your plan pays nothing.
  • Manufacturer discounts on brand-name drugs and generic drug discounts help lower your costs in the gap, though not all drugs may have access to.
  • You can avoid or delay the gap by using generic drugs, asking your doctor about lower-cost alternatives, or switching to a plan with a different structure.
  • Once you reach catastrophic coverage, your costs drop sharply, and you pay only a small copay or coinsurance for the rest of the calendar year.

How Much You Pay During the Gap

In the coverage gap, you are responsible for 25 percent of the cost of most drugs. This applies to both brand-name and generic medications. Your insurance plan does not contribute during this period, so the full burden falls on you until you reach the catastrophic threshold.

However, you may receive some relief through manufacturer discounts and generic drug discounts. Pharmaceutical companies offer discounts on brand-name drugs to help lower your gap costs. Generic drugs also have built-in discounts during the gap. These reductions are automatic — you do not need to do anything to receive them — but they vary by drug and manufacturer. Not every medication qualifies for a discount.

The exact amount you pay depends on the drug's price. A $100 medication costs you $25 in the gap; a $500 medication costs you $125. These costs add up quickly if you take multiple prescriptions or use expensive biologics.

When the Gap Affects Your Budget Most

The gap hits hardest if you take chronic medications year-round or use specialty drugs for conditions like rheumatoid arthritis, cancer, or hepatitis C. People on three or more regular prescriptions often enter the gap by summer or early fall. Those taking one or two inexpensive generics may never reach it.

Timing matters too. If your prescriptions are expensive early in the year, you could enter the gap in June or July and stay there for several months. If your drug costs are spread more evenly, you might not hit the gap until November or December, which means you spend less time in it before catastrophic coverage begins.

Some people face the gap every single year because their medications are costly and necessary. Others enter it only occasionally, depending on whether they start a new drug or refill prescriptions at different times. Tracking your spending through your plan's online portal or by calling your insurer helps you predict when you might enter the gap.

Strategies to Lower Your Costs in the Gap

One of the most effective ways to avoid the gap is to use generic drugs instead of brand-name versions whenever your doctor agrees. Generics cost significantly less, so you spend less toward the $5,850 threshold and may never enter the gap at all. Ask your doctor or pharmacist whether a generic alternative exists for each of your medications.

Another option is to talk with your doctor about lower-cost drugs that treat the same condition. Some medications work equally well but cost much less. Your doctor may be willing to switch you to a less expensive option, especially if you explain that cost is a concern. This conversation is most useful before you enter the gap, but it can help even after you do.

You can also review your Part D plan each year during the annual enrollment period (October 15 to December 7). Some plans have a different structure that may work better for your situation. A few plans offer coverage that reduces or eliminates the gap, though these plans usually charge higher monthly premiums. Comparing plans based on your actual prescriptions — not just the premium — can reveal whether a different plan saves you money overall.

If you may have access to for Extra Help, a federal program for people with limited income and resources, your gap costs are covered almost entirely. Contact your local Social Security office or visit the Social Security website to learn whether you may have access to.

How Catastrophic Coverage Works After the Gap

Once your out-of-pocket spending reaches $8,550 in 2024, you move into catastrophic coverage. At this point, your costs drop dramatically. You pay only a small copay (usually $3.95 to $9.85 for generics and $9.85 to $24.63 for brand-name drugs) or 5 percent coinsurance, whichever is higher, for the rest of the calendar year.

Catastrophic coverage continues through December 31. On January 1, the cycle resets: your out-of-pocket spending counter goes back to zero, and you start again at the initial coverage phase. If you take expensive medications, you may cycle through the gap and into catastrophic coverage every year.

Tracking Your Spending and Staying Informed

Most Part D plans provide an online account where you can see how much you and your plan have spent on drugs so far this year. You can also call your plan's customer service number (on the back of your insurance card) and ask where you stand. Knowing your spending helps you plan ahead and decide whether to switch plans or adjust your medications before entering the gap.

Your plan must send you a notice when you enter the coverage gap. This notice explains your costs and options. Read it carefully, because it may include information about manufacturer discounts or other savings programs specific to your drugs.

The dollar amounts for the gap change each year. The Social Security Administration announces the new thresholds in September for the following year. If you take the same medications annually, your gap timing may shift slightly from year to year because of these changes.

Frequently Asked Questions

Does everyone with Part D enter the coverage gap?

No. You only enter the gap if your total drug costs reach the annual threshold, which is $5,850 in 2024. People who take inexpensive or few medications may never spend that much in a year. Those on multiple chronic medications or specialty drugs are more likely to hit the gap.

Can I switch Part D plans if I am already in the gap?

You can switch plans only during the annual enrollment period (October 15 to December 7) or if you experience a may have access to life event such as loss of other coverage. You cannot switch mid-year just because you entered the gap, but you can plan ahead for next year by choosing a plan that better fits your medication costs.

Do all drugs have manufacturer discounts in the gap?

No. Manufacturer discounts are available for many brand-name drugs, but not all. Generic drugs have automatic discounts built in, but the amount varies. Your pharmacist can tell you whether a specific drug qualifies for a discount when you fill your prescription.

What happens to my gap spending if I switch pharmacies?

Your out-of-pocket spending is tracked by your insurance plan, not by your pharmacy. Switching pharmacies does not reset your gap counter. Your plan keeps a running total of what you have spent across all pharmacies, so your progress toward the gap and catastrophic coverage continues regardless of where you fill prescriptions.

Is the coverage gap the same for everyone on Part D?

The gap thresholds and your cost-sharing percentage (25 percent) are the same for all standard Part D plans. However, some plans offer enhanced coverage that reduces gap costs, and these plans may have different rules. Your specific out-of-pocket costs also depend on which drugs you take and whether they may have access to for discounts.