What the Donut Hole Is and When It Kicks In

The donut hole is a gap in prescription drug coverage that happens when you and your Medicare Part D plan have spent a certain amount of money on drugs in a single year. Once you hit that spending threshold, your plan stops paying its share, and you pay more out of pocket until you reach a second spending limit called catastrophic coverage.

In 2024, the donut hole begins after you and your plan together have spent $5,850 on covered drugs. From that point until your total out-of-pocket spending reaches $8,550, you pay a larger share of the cost of each prescription. The exact amounts you pay depend on your specific plan and the drug, but the gap is real and can make medications suddenly much more expensive.

Not every Medicare beneficiary enters the donut hole. If you take only a few inexpensive medications or have a plan with a high deductible and low monthly premiums, you may never reach the $5,850 threshold in a year. But if you take multiple medications or use brand-name drugs, the donut hole is something to plan for.

Key Takeaways

  • The donut hole is a coverage gap that begins after you and your plan spend $5,850 on covered drugs in 2024, and it ends when your out-of-pocket costs reach $8,550.
  • Once you are in the donut hole, you pay a larger percentage of the drug cost, though the exact amount depends on your plan and the specific medication.
  • Some drugs are covered differently in the donut hole, and some plans offer additional coverage that reduces or eliminates the gap.
  • Switching to a generic drug or a different medication in the same class can lower your costs both before and during the donut hole.
  • You can track your spending throughout the year using your plan's online portal or by calling the plan directly to know when you are approaching the donut hole.

How Much You Pay Inside the Donut Hole

Inside the donut hole, you are responsible for a larger share of the drug cost. For most drugs, you pay 25% of the cost, though some plans structure this differently. Your plan does not pay anything during this phase, and the drug manufacturer's discount (if one exists) does not count toward closing the gap.

The amount you pay varies by drug type. For brand-name drugs, you typically pay 25% of the negotiated price. For generic drugs, you may pay a flat copay or a percentage, depending on your plan. Some medications fall into special categories and may have different cost-sharing rules even in the donut hole.

The donut hole closes once your total out-of-pocket spending — the money you personally paid — reaches $8,550 in 2024. After that, you enter catastrophic coverage, where Medicare and your plan pay most of the cost and you pay only a small copay or coinsurance for the rest of the year.

Plans That Reduce or Cover the Donut Hole

Not all Part D plans leave you unprotected in the donut hole. Some plans offer enhanced coverage that pays part or all of your costs while you are in the gap. These plans typically charge higher monthly premiums, but they can save money if you take expensive medications or multiple drugs.

Plans that cover the donut hole are most common among beneficiaries who may have access to for both Medicare and Medicaid (called dual-may be able to access) or those with low incomes. If you fall into either category, your state Medicaid program or a Medicare Savings Program may cover your costs in the donut hole. You can learn whether you may have access to by contacting your state Medicaid office or calling 1-800-MEDICARE.

When you are shopping for a Part D plan during open enrollment, the plan's summary will show whether it covers any costs in the donut hole. Compare the total estimated cost for your specific medications across different plans — some plans with higher premiums may cost less overall if they cover the donut hole.

Strategies to Lower Your Costs in the Donut Hole

One of the most effective ways to reduce donut hole costs is to switch to a generic version of your medication if one is available. Generic drugs are chemically identical to brand-name drugs but cost significantly less. If your doctor prescribed a brand-name drug, ask whether a generic is available and whether it would work as well for your condition.

Another strategy is to talk with your doctor about alternative medications in the same drug class. For example, if you take an expensive blood pressure medication, your doctor may be able to prescribe a different one that is less costly. This works best if you plan ahead — ideally before you enter the donut hole — so your doctor has time to make the change safely.

Some drug manufacturers offer patient information programs that provide free or reduced-cost medications to people who meet income requirements. You can search for these programs on the manufacturer's website or ask your pharmacist whether one exists for your drug. These programs can help you pay for medications both before and during the donut hole.

Tracking Your Spending and Knowing When You Are Close

Your Part D plan is required to send you a notice when you enter the donut hole, but you do not have to wait for that letter to know where you stand. Most plans offer an online account where you can see your year-to-date spending in real time. Log in to your plan's website and look for a section labeled "claims" or "spending" to see how much you and your plan have paid so far.

If you do not use the online portal, call your plan's customer service number (on the back of your insurance card) and ask a representative to tell you your current spending. They can also tell you how much more you need to spend to reach the donut hole and what your costs will be once you do. Knowing this information helps you plan ahead and make decisions about your medications.

Some beneficiaries use a spreadsheet or calendar to track their prescriptions and costs throughout the year. Write down the date you fill each prescription, the drug name, the amount you paid, and the amount your plan paid. This gives you a running total and helps you catch errors if your plan's records do not match what you remember paying.

What Happens After the Donut Hole Closes

Once your out-of-pocket spending reaches $8,550 in 2024, you enter catastrophic coverage. At this point, Medicare and your plan pay most of the cost of your drugs for the rest of the year. You typically pay only a small copay (usually $3.95 to $9.85 for generic drugs and $9.85 to $24.70 for brand-name drugs, though these amounts change yearly) or 5% coinsurance, whichever is higher.

Catastrophic coverage lasts through December 31st. On January 1st of the next year, your coverage resets, your out-of-pocket spending counter goes back to zero, and the donut hole begins again if you continue to take the same medications.

Frequently Asked Questions

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

Yes, all standard Part D plans have a donut hole. However, some plans offer enhanced coverage that reduces or eliminates your costs in the gap. When you choose a plan, check whether it covers any donut hole costs before you sign up.

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

No, you cannot switch plans mid-year unless you have a may have access to life event such as losing employer coverage or moving to a new state. You can switch during the annual open enrollment period, which runs from October 15 to December 7 each year, and the new plan takes effect January 1st.

Do insulin copays count toward closing the donut hole?

Yes, what you pay for insulin counts toward your out-of-pocket spending. However, Medicare has capped insulin copays at $35 per month for beneficiaries in Part D, so your actual costs may be lower than they would otherwise be.

What if I cannot afford my medications in the donut hole?

Talk to your doctor or pharmacist about generic alternatives, patient information programs, or different medications that may cost less. You can also contact your local Area Agency on Aging or call 1-800-MEDICARE to learn about programs that may help pay for your drugs.

Do the donut hole numbers change every year?

Yes, the spending thresholds for the donut hole are adjusted each year based on inflation. The amounts for 2024 are $5,850 for the start of the donut hole and $8,550 for catastrophic coverage. Check your plan's materials or call 1-800-MEDICARE in the fall to learn the amounts for the coming year.