What the Donut Hole Is and When It Kicks In

The donut hole is a gap in Medicare Part D prescription drug coverage where you pay the full cost of your medications for a period each year. It happens after you and your insurance plan together spend a certain amount on covered drugs — that amount changes each year, but in 2024 it starts after combined spending reaches $5,830. Once you hit that threshold, you pay 100% of the drug price until your out-of-pocket costs reach another limit (in 2024, that limit is $8,550). After you cross that second limit, catastrophic coverage kicks in and you pay only a small copay or coinsurance.

The donut hole exists because of how Medicare Part D is structured. Your plan pays part of the cost, you pay part of the cost, and the government counts both toward the spending threshold. Once you enter the gap, your plan stops paying its share temporarily — you're on your own until you reach catastrophic coverage. This can mean a sudden jump in what you owe at the pharmacy, especially if you take expensive medications.

Key Takeaways

  • The donut hole begins after you and your plan spend $5,830 combined on covered drugs in 2024, and you pay 100% of drug costs until your out-of-pocket spending reaches $8,550.
  • Generic drugs and brand-name drugs are treated differently in the donut hole — generics often cost less, so switching can lower your out-of-pocket costs.
  • People with low incomes may not enter the donut hole at all because of Extra Help, a program that covers most drug costs year-round.
  • Your plan's formulary (the list of covered drugs) and negotiated prices affect when you hit the donut hole, so comparing plans before enrollment can save you money.
  • Once you reach catastrophic coverage, you pay only a small amount per prescription for the rest of the year, regardless of the drug's actual cost.

How the Numbers Add Up: Tracking Your Spending

Understanding how your spending is counted helps you predict when you'll enter the donut hole. Both what you pay at the pharmacy and what your insurance plan pays count toward the $5,830 threshold. If your plan negotiates a drug price of $100 and you pay a $25 copay, that full $100 counts — not just your $25. This means you can hit the donut hole faster than you might expect based on what comes out of your pocket alone.

Your Part D plan sends you statements showing your year-to-date spending in both categories. When you're close to the threshold, the statement will tell you how much more spending it takes to enter the donut hole. Some pharmacies also display this information on your receipt. Tracking this number matters because once you enter the gap, your costs change dramatically — a drug that cost you $25 might suddenly cost $150 if you're paying the full negotiated price.

Generic Drugs and Brand-Name Drugs in the Donut Hole

In the donut hole, you pay the full negotiated price for any drug, but generic versions cost significantly less than brand-name versions. If you take a brand-name medication and a generic equivalent exists, switching to the generic during the donut hole can cut your out-of-pocket costs in half or more. Your doctor can prescribe the generic version, or you can ask your pharmacist whether a generic is available for any of your medications.

The price difference matters most when you're in the donut hole because you're paying the full amount. Outside the donut hole, your copay is the same whether you choose generic or brand-name (usually), so the savings are less obvious. But once you're in the gap and paying full price, the generic option becomes much more attractive. Talk to your doctor before the donut hole season arrives — if you take expensive brand-name drugs, switching to generics in advance can help you avoid the gap altogether or pass through it faster.

Who Avoids the Donut Hole Entirely

If you have a low income, you may not experience the donut hole at all. Extra Help (also called the Low-Income Subsidy program) covers most of your drug costs year-round, including during what would normally be the donut hole period. You pay a small copay for each prescription, and the program covers the rest. To be considered for Extra Help, your income must fall below certain limits — in 2024, that's roughly $20,000 for an individual or $27,000 for a married couple, though these numbers change yearly.

You can check whether you may have access to for Extra Help through Social Security, your local Area Agency on Aging, or by calling 1-800-MEDICARE. If you're approved, your plan automatically switches to one that includes Extra Help, and you'll see the difference at the pharmacy when ready. Some people may have access to for Extra Help but haven't enrolled — if you're on a tight budget and take multiple medications, it's worth checking.

Strategies to Reduce Donut Hole Impact

One practical approach is to choose a plan with a lower deductible and higher copays, which can delay when you hit the donut hole threshold. Another is to select a plan with a lower out-of-pocket maximum — the $8,550 limit varies slightly by plan type, and some plans offer lower maximums. During open enrollment (October 15 to December 7 each year), you can compare plans side by side to see which one minimizes your total yearly costs based on your specific medications.

If you're already in the donut hole, ask your pharmacist about manufacturer discounts or patient information programs. Many drug makers offer coupons or free medication programs for people in the donut hole. Your pharmacist can check whether your medications have these programs available. You can also talk to your doctor about whether a lower-cost medication in the same drug class might work for you — sometimes a different drug that treats the same condition costs much less.

When the Donut Hole Ends Each Year

The donut hole period ends on December 31 of each year. Once catastrophic coverage begins — which happens when your out-of-pocket spending reaches the annual limit — you stay in catastrophic coverage through the end of the year. In 2024, catastrophic coverage means you pay 5% of the cost for brand-name drugs and 5% for generics (or a small flat copay, whichever is higher). On January 1, the counter resets and you start the year outside the donut hole again, paying your plan's regular copays.

This reset is important to understand if you're in the donut hole in November or December. You might be tempted to delay filling prescriptions until January to avoid the gap, but that decision depends on your specific situation. If you're close to catastrophic coverage, you might reach it before year-end and pay less overall. If you're deep in the donut hole with months to go, waiting might make sense — but talk to your doctor before skipping doses or delaying treatment.

Frequently Asked Questions

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

No, you cannot switch plans mid-year unless you have a may have access to life event like losing employer coverage or moving to a new state. Your best option is to work with your current plan to minimize costs — ask about manufacturer discounts, patient information programs, or whether a generic alternative exists for your medications. You can switch plans during the next open enrollment period in October.

Does the donut hole explore to all medications?

The donut hole applies to all covered drugs on your plan's formulary. However, some plans cover certain medications differently — for example, some insulin products may have a $35 copay year-round, even in the donut hole. Check your plan's formulary or call the plan to ask whether specific medications you take have special coverage rules.

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

Contact your plan's customer service and ask about manufacturer coupons, patient information programs, or whether a lower-cost generic or alternative drug is available. You can also call 1-800-MEDICARE to ask about Extra Help or other programs. Some community health centers offer discounted medications, and pharmaceutical companies often have programs for people who cannot afford their drugs.

How do I know when I'm about to enter the donut hole?

Your Part D plan sends you statements showing your year-to-date spending. When you're within a few hundred dollars of the $5,830 threshold, the statement will show how much more spending triggers the donut hole. You can also call your plan's customer service number and ask your current spending level — they can tell you exactly how much more you need to spend to enter the gap.

Does the donut hole threshold change every year?

Yes, the donut hole threshold and out-of-pocket maximum both change each year based on inflation. In 2024, the threshold is $5,830 and the out-of-pocket maximum is $8,550. Medicare announces the new amounts each fall, and your plan will send you updated information before the new year begins. Check your plan's materials or call 1-800-MEDICARE to confirm the current year's amounts.