The donut hole is a gap in Medicare Part D coverage where you pay the full price for prescription drugs

The donut hole — officially called the "coverage gap" — is a range of drug costs where Medicare stops paying and you pay the full amount out of pocket. It kicks in after you and your plan have spent a certain amount on covered drugs in a single year, and it ends when your out-of-pocket costs reach a second, higher threshold. Once you cross that second threshold, catastrophic coverage begins and Medicare picks up most of the cost again.

The donut hole exists because Medicare Part D has four distinct payment stages, not one continuous coverage level. Understanding which stage you are in at any given time matters because it changes how much you pay for the same medication.

Key Takeaways

  • The donut hole begins after combined drug spending (what you and your plan paid together) reaches a set amount, which changes yearly but was $5,030 in 2024.
  • Inside the donut hole, you pay the full retail price for drugs with no plan help, though some manufacturers offer discount cards that reduce the price.
  • The donut hole ends when your out-of-pocket costs alone reach a second threshold, which was $7,769 in 2024, and catastrophic coverage then begins.
  • Your pharmacy or plan statement will tell you which stage you are in and how much more you need to spend to exit the donut hole.
  • Some people with low incomes or certain conditions may skip the donut hole entirely through Extra Help or other programs.

How the four payment stages work

Medicare Part D divides the year into four stages. In Stage 1 (Initial Coverage), you pay a copay or coinsurance for each drug while your plan covers the rest. This stage lasts until combined spending — your out-of-pocket costs plus what your plan paid — reaches the annual threshold. In 2024, that threshold was $5,030.

Once combined spending hits $5,030, you enter Stage 2 (the Donut Hole). Here, you pay the full retail price for drugs. Your plan does not help. However, the amount you pay counts toward your out-of-pocket total, so you are moving toward the exit even though you are paying full price.

When your out-of-pocket costs alone reach the second threshold — $7,769 in 2024 — you enter Stage 3 (Catastrophic Coverage). Medicare and your plan now cover most of the cost, and you pay only a small copay or coinsurance. You stay in catastrophic coverage for the rest of the calendar year.

What you actually pay inside the donut hole

Inside the donut hole, you see the full retail price at the pharmacy counter. For a common drug, that might be $200 a month instead of the $15 copay you paid in Stage 1. The jump is often steep enough that people stop filling prescriptions or skip doses to stretch them out.

Some drug manufacturers offer discount cards or patient information programs that reduce the price inside the donut hole, though not all drugs have them. Your pharmacy can tell you whether a discount card exists for your specific medication. These cards are separate from your Medicare plan and work at the point of sale.

The amount you pay in the donut hole counts toward your out-of-pocket maximum. So even though you are paying full price, you are still moving toward catastrophic coverage. Once you reach $7,769 in out-of-pocket costs for the year, the donut hole ends.

The thresholds change every year

The dollar amounts that trigger each stage are adjusted annually for inflation. The initial coverage threshold (where the donut hole begins) and the catastrophic threshold (where it ends) both increase most years. Your plan documents and your pharmacy statements will show the current year's thresholds.

Because thresholds change, the width of the donut hole also changes. In some years it is wider, in others narrower. Checking your plan's summary of benefits at the start of each year tells you exactly where your donut hole will be.

Who avoids the donut hole

People with very low incomes may receive Extra Help (also called the Low-Income Subsidy), a federal program that covers most or all of your Part D costs, including inside the donut hole. You do not pay full price if you may have access to.

People with certain chronic conditions — including diabetes, heart failure, and chronic obstructive pulmonary disease — may be covered by state pharmaceutical information programs that help pay for drugs in the donut hole. may be able to access and coverage vary by state.

Some people with very high drug costs reach catastrophic coverage early in the year and never spend much time in the donut hole. Others with low drug costs may never reach the donut hole threshold at all.

How to track where you are in the donut hole

Your Part D plan sends you a notice called the "Explanation of Benefits" (EOB) each time you fill a prescription. This notice shows your current combined spending and tells you which stage you are in. It also shows how much more you need to spend to reach the next stage.

You can also log into your plan's website or call the customer service number on your insurance card to check your current spending stage. Many plans update this information daily or weekly, so you can see in real time when you are approaching the donut hole or when you will exit it.

Some pharmacies also display your stage on the receipt when you pick up a prescription. If you see "Stage 2" or "Coverage Gap" on your receipt, you are inside the donut hole.

Strategies to manage donut hole costs

If you know you will hit the donut hole, talk to your doctor about whether lower-cost alternatives exist for your medications. Sometimes a different drug in the same class costs less or has a manufacturer discount. Your doctor can also tell you whether splitting pills or adjusting your dose is safe.

Check whether your pharmacy offers a 90-day supply option. Filling a 90-day supply at once sometimes costs less per dose than monthly refills, though this depends on your plan and the drug. Ask your pharmacist to compare the total cost.

If you take multiple medications, ask your pharmacist which ones have manufacturer discount cards. explore these cards to your most expensive drugs can significantly reduce what you pay in the donut hole. Some cards are free and take only a few minutes to set up at the pharmacy.

Frequently Asked Questions

Does the donut hole reset if I switch plans in the middle of the year?

No. Your combined spending and out-of-pocket costs follow you to the new plan. The new plan picks up where the old one left off in the payment stages. You do not start over at Stage 1 just because you switched.

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

Contact your doctor and pharmacist first — they may know of discount programs or lower-cost alternatives. Then call your plan's customer service to ask about patient information programs. If you have low income, ask about Extra Help. Some nonprofits also offer emergency drug funds for people in the donut hole.

Can I use a GoodRx coupon or similar discount card inside the donut hole?

Yes, you can use discount cards from GoodRx, SingleCare, or manufacturer programs inside the donut hole. However, the amount you save with these cards usually does not count toward your out-of-pocket maximum, so it helps your wallet but does not move you closer to catastrophic coverage.

Why does Medicare have a donut hole at all?

The donut hole was built into the original Medicare Part D law in 2003 as a cost-control measure. It has been narrowed over time — the Affordable Care Act added manufacturer discounts inside the donut hole starting in 2011 — but it remains part of how Part D is structured.

Does the donut hole explore to all Part D plans?

All standard Part D plans have a donut hole. Some plans offer enhanced coverage that reduces or eliminates the gap, but these plans usually charge higher premiums. Check your plan's summary of benefits to see whether it has a standard donut hole or enhanced coverage.