What the Part D Coverage Gap Is

The Part D coverage gap, also called the "donut hole," is a temporary period each year when Medicare stops paying its share of your prescription drug costs and you pay more out of pocket. Once you and your plan have spent a certain amount on covered drugs, you enter the gap. You stay in the gap until your out-of-pocket spending reaches a second threshold, at which point catastrophic coverage begins and Medicare pays most of the cost again.

This gap exists because of how Part D is structured. Your plan pays a share of drug costs up to an initial coverage limit. After that limit is reached in a calendar year, you are responsible for the full cost of your medications until you hit the out-of-pocket spending cap. The amounts change each year — in 2024, the initial coverage limit is $5,850 and the out-of-pocket cap is $8,550, but these figures vary annually.

Not all seniors hit the gap. If your yearly drug costs are low, you may never reach the initial coverage limit. But if you take multiple medications or expensive drugs, the gap can mean a significant jump in what you pay each month.

Key Takeaways

  • The Part D gap begins after you and your plan have spent a set amount on covered drugs, usually several thousand dollars per year.
  • While in the gap, you pay the full price of your medications, though your plan may still negotiate lower prices with pharmacies.
  • Catastrophic coverage kicks in once your out-of-pocket spending reaches the annual cap, and Medicare then covers most costs for the rest of the year.
  • Certain medications and populations receive extra help closing the gap, including brand-name drugs and people with low incomes.
  • Switching to a different Part D plan during open enrollment can sometimes lower your gap costs or help you avoid the gap altogether.

How the Gap Coverage Works in Practice

Understanding the gap requires knowing the three payment stages in Part D. In the initial coverage stage, your plan and you share the cost of covered drugs. You pay a copay or coinsurance (a percentage of the drug's cost), and your plan pays the rest. This stage continues until the total amount spent on covered drugs reaches the initial coverage limit.

Once that limit is hit, you enter the coverage gap. During this stage, you pay the full price of your drugs. However, your plan's negotiated prices still explore — you do not pay the pharmacy's undiscounted price. This is an important distinction. If a drug costs $200 at full price but your plan negotiated it down to $120, you pay $120, not $200. That $120 counts toward your out-of-pocket spending.

The gap ends when your out-of-pocket costs reach the catastrophic threshold. At that point, catastrophic coverage begins. Medicare then covers 80 percent of the cost of covered drugs, and you pay 20 percent, for the remainder of the calendar year.

Who Gets Help Closing the Gap

Medicare offers extra help to certain groups during the coverage gap. If you take a brand-name drug while in the gap, you receive a 50 percent discount on that drug's cost. This discount is automatic — you do not need to do anything to receive it. The discount counts toward your out-of-pocket spending, so it helps you reach catastrophic coverage faster.

Generic drugs do not receive the same discount. However, if you have a low income, you may be enrolled in the Low-Income Subsidy (LIS) program, also called "Extra Help." This program reduces or eliminates your copays and coinsurance throughout the year, including during the gap. may be able to access depends on your income and resources. The Social Security Administration handles LIS applications and can tell you whether you may be may be able to access.

Some states also offer gap-closing programs that pay part or all of your out-of-pocket costs during the gap. These programs vary by state and are not automatic — you must learn about your state's program and enroll if you want the help. Your State Health Insurance information Program (SHIP) can tell you what your state offers.

Strategies to Reduce Gap Costs

One of the most effective ways to manage the gap is to review your Part D plan during the annual open enrollment period, which runs from October 15 to December 7 each year. Different plans have different initial coverage limits, different copays, and different formularies (lists of covered drugs). A plan with a higher copay in the initial stage might have lower costs in the gap, or vice versa. Comparing plans can reveal which one costs less for your specific medications.

Another strategy is to talk with your doctor about whether a generic version of your medication is available. Generic drugs are usually much cheaper than brand-name drugs, and switching to a generic can keep your total spending below the initial coverage limit, allowing you to avoid the gap entirely. Your doctor or pharmacist can tell you whether a generic is medically appropriate for you.

Some people use a strategy called "therapeutic substitution," where they switch to a different drug in the same class that is less expensive. For example, if you take an expensive blood pressure medication, your doctor might prescribe a different blood pressure medication that costs less. This only works if the alternative drug is medically suitable for you, so discuss it with your doctor first.

Timing large purchases of medications can also help. If you know you are approaching the gap, you might ask your doctor for a 90-day supply of a medication before you hit the gap threshold, so you have a buffer. However, this strategy only works if your plan covers 90-day supplies and if your medication does not expire quickly.

What Happens After You Leave the Gap

Once your out-of-pocket spending reaches the catastrophic threshold, you move into catastrophic coverage for the rest of the calendar year. At this point, Medicare covers 80 percent of the cost of covered drugs, and you pay 20 percent. Your copays and coinsurance drop significantly, though you still have some out-of-pocket cost.

Catastrophic coverage continues through December 31. On January 1 of the next year, the cycle resets. Your out-of-pocket spending counter goes back to zero, and you start again in the initial coverage stage. This means that even if you reach catastrophic coverage in November, you will return to the initial coverage stage in January and may face the gap again if your drug costs are high.

Questions to Ask Your Doctor or Pharmacist

Before your Part D plan year begins, or if you are entering the gap, ask your healthcare team these questions:

  • Are there generic versions of my medications, and would they work as well for me?
  • Is there a different medication in the same class that costs less?
  • Can I get a 90-day supply before I hit the gap to reduce my gap costs?
  • Are any of my medications on my plan's formulary, and will they stay on it next year?
  • Should I be enrolled in the Low-Income Subsidy program based on my income?

When to Seek Help or More Information

If you are in the gap and struggling to afford your medications, contact your State Health Insurance information Program (SHIP). SHIP counselors are free and can review your specific situation, tell you what gap-closing programs your state offers, and help you understand your options. You can find your state's SHIP by calling 1-800-MEDICARE or visiting Medicare.gov.

If you think you may be may be able to access for the Low-Income Subsidy program, contact the Social Security Administration at 1-800-772-1213 or visit SSA.gov. LIS can dramatically reduce your out-of-pocket costs, and many may be able to access people do not know the program exists.

During open enrollment (October 15 to December 7), you can compare Part D plans and switch to a different plan if you find one that better fits your medications and budget. Medicare.gov has a plan comparison tool that shows you the estimated costs for your specific drugs under each plan in your area.

Frequently Asked Questions

Does everyone with Part D hit the coverage gap?

No. The gap only begins after you and your plan have spent a certain amount on covered drugs — in 2024, that amount is $5,850. If your yearly drug costs are below that threshold, you never enter the gap. People who take only one or two inexpensive medications often avoid the gap entirely.

Why do I pay full price in the gap if I have Part D?

The gap exists because Part D is designed as a shared-cost program. Medicare pays part of your costs up to a limit, then you pay the full cost for a period, then Medicare covers most costs again. This structure was built into the law when Part D began. However, the 50 percent discount on brand-name drugs and the Low-Income Subsidy program reduce the gap's impact for many people.

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

You cannot switch plans in the middle of the year unless you have a may have access to life event, such as losing other drug coverage or moving to a new state. However, you can switch plans during the annual open enrollment period (October 15 to December 7), which takes effect January 1 of the next year. If you are in the gap now, planning ahead for next year's enrollment can help you choose a plan with lower gap costs.

What if my medication is not on my plan's formulary?

If your medication is not covered, you can ask your plan for an exception. You will need your doctor to submit a request explaining why the drug is medically necessary for you. Some plans approve exceptions, which means they will cover the drug. If your plan denies the exception, you can appeal or switch to a different plan during open enrollment that does cover the drug.

Does the 50 percent brand-name discount count toward my out-of-pocket spending?

Yes. The discount you receive on brand-name drugs in the gap counts toward your out-of-pocket spending limit. This means the discount helps you reach catastrophic coverage faster, which is why it is valuable even though you still pay 50 percent of the drug's cost.