What the doughnut hole is and when you hit it

The doughnut hole is a gap in Medicare Part D prescription drug coverage where you pay the full cost of your medications yourself. It starts after you and your insurance plan together have spent a certain amount on covered drugs — that amount changes each year, but in 2024 it begins around $5,850 in total drug costs. Once you reach that point, you pay out of pocket until your total out-of-pocket spending reaches a second threshold (around $7,050 in 2024), at which point catastrophic coverage kicks in and your plan pays most costs again.

The gap exists because of how Medicare Part D is structured: you pay a monthly premium, then a copay or coinsurance for each prescription until the first spending limit is reached. After that, you're in the doughnut hole and responsible for the full price of drugs — not just a copay, but the actual pharmacy price. This can mean a $30 copay suddenly becomes a $150 or $300 out-of-pocket cost for the same medication.

Not everyone hits the doughnut hole. If your drug costs stay below the initial threshold, you never enter it. But if you take multiple medications or use expensive drugs, you can fall into it by mid-year and stay there for months.

Key Takeaways

  • The doughnut hole is a coverage gap where you pay the full pharmacy price for prescriptions after you and your plan have spent a set amount on drugs — roughly $5,850 in 2024.
  • Once you reach the second spending threshold (roughly $7,050 in 2024), catastrophic coverage begins and your plan pays most of your drug costs again.
  • Brand-name drugs and biologics receive a 25% discount during the doughnut hole, but generic drugs do not, making generics more affordable in the gap.
  • You can lower your doughnut hole risk by choosing a plan with lower deductibles, using generic medications, or enrolling in programs like Extra Help if your income qualifies.
  • Your plan must send you a notice when you enter the doughnut hole, giving you time to talk with your doctor about cost-saving options.

How the spending thresholds work year to year

Medicare recalculates the doughnut hole thresholds every January based on inflation and drug price changes. The initial threshold (where the gap begins) and the catastrophic threshold (where the gap ends) both shift, usually upward. In recent years, the initial threshold has hovered between $5,500 and $5,900, while the catastrophic threshold has been between $6,700 and $7,100.

Your plan counts spending in a specific way: it includes the full pharmacy price of covered drugs, your copays or coinsurance, and manufacturer discounts — but not your monthly premium. Once the total reaches the initial threshold, you enter the doughnut hole. Your out-of-pocket costs (what you actually pay at the pharmacy) count toward the catastrophic threshold, so you're moving through the gap even while you're paying full price.

Because thresholds change yearly, a medication that cost you $200 out of pocket in the doughnut hole last year might cost $210 this year. Plans send you a summary of your drug costs and your position in the coverage stages each quarter, so you can track where you stand.

What you pay during the doughnut hole

During the doughnut hole, you pay the full negotiated price that the pharmacy and your plan have agreed on — not the retail price you'd see without insurance, but not a copay either. For a generic drug, this might be $15 to $50 per prescription. For a brand-name drug, it can easily be $100 to $500 or more per prescription, depending on the medication.

There is one exception: brand-name drugs and certain biologics receive a 25% discount during the doughnut hole. This discount is applied automatically at the pharmacy — you don't have to ask for it. So if a brand-name drug's negotiated price is $400, you pay $300 during the doughnut hole (the 25% discount brings it down). Generic drugs do not receive this discount, which is one reason switching to a generic version can save you significantly if you're in the gap.

Once you reach the catastrophic threshold, your plan takes over again. You'll pay a small copay (usually $3.95 to $10.70 per prescription in 2024) or coinsurance (5% of the drug cost), and your plan covers the rest for the remainder of the year.

Strategies to avoid or reduce doughnut hole costs

One of the most direct ways to lower your risk is to choose a Part D plan with a lower deductible or no deductible at all. Plans with no deductible mean you start paying copays when ready, which can help you reach the initial spending threshold more slowly than plans with a $500 or $600 deductible. Compare plans during open enrollment (October 15 to December 7 each year) using the Medicare Plan Finder tool on Medicare.gov.

Ask your doctor whether a generic version of your medication is available and whether it would work as well for you. Generic drugs cost less at every stage of coverage, including during the doughnut hole. If you're already in the gap and taking a brand-name drug, switching to the generic version can cut your out-of-pocket costs by 50% or more.

If your income is low, you may may have access to for Extra Help, a federal program that reduces your Part D costs, including during the doughnut hole. Extra Help covers copays and coinsurance and can eliminate the doughnut hole entirely for those who may have access to. You can check your potential may be able to access on the Social Security Administration website or call 1-800-MEDICARE to speak with someone about your situation.

Some pharmaceutical manufacturers offer patient information programs that provide free or reduced-cost medications to people who meet income requirements. Your doctor's office or the drug manufacturer's website can tell you whether your medication has such a program.

When your plan notifies you that you've entered the doughnut hole

Your Part D plan is required to send you a written notice when you enter the doughnut hole. This notice must arrive within 15 days of when you cross the initial spending threshold. The notice will tell you that you've entered the gap, explain what you'll pay going forward, and list resources for saving money on drugs.

This notice is your cue to act. Call your doctor and pharmacist to discuss whether you can switch to a generic drug, reduce your dose, or try a different medication that costs less. Some people also use this moment to ask their doctor whether they truly need all the medications they're taking — sometimes a medication can be paused or stopped without harm.

If you receive the notice and realize you can't afford your medications, call 1-800-MEDICARE. Medicare staff can walk you through Extra Help, patient information programs, and other options specific to your drugs and income.

How the doughnut hole has changed in recent years

The doughnut hole has been shrinking since 2010, when the Affordable Care Act began closing it gradually. In 2010, people in the gap paid 100% of drug costs. By 2024, brand-name drugs receive a 25% discount and generic drugs receive a 75% discount (meaning you pay 25% of the price). The gap itself has also grown wider — the initial threshold has increased faster than it would have without policy changes, meaning fewer people hit the gap at all.

Starting in 2025, Medicare will cap out-of-pocket spending for seniors at $2,000 per year for Part D drugs. This is a major change: once your out-of-pocket costs reach $2,000, your plan will cover the rest of your drug costs for that year, even if you're still in what would have been the doughnut hole. This means the doughnut hole as it exists today will effectively disappear for most people.

These changes mean the doughnut hole is less punishing than it was a decade ago, but it can still create a sudden jump in what you pay. Understanding how it works helps you plan ahead and know what to do if you hit it.

Comparing Part D plans to find the best fit for your drugs

Not all Part D plans are the same. Some have low premiums but high copays and deductibles; others have higher premiums but lower out-of-pocket costs. The plan that's cheapest for one person might be expensive for another, depending on which drugs they take.

Use the Medicare Plan Finder tool at Medicare.gov to compare plans. Enter your current medications, and the tool will show you the total estimated cost for each plan — including premiums, copays, and doughnut hole costs — for the year. This total cost is often more useful than looking at the premium alone. A plan with a $35 monthly premium might cost you $2,000 more per year than a plan with a $50 monthly premium, once you factor in your actual drug costs.

Pay special attention to whether your drugs are on each plan's formulary (the list of covered drugs) and at what tier. Tier 1 drugs (generics) have the lowest copays. Tier 2 (preferred brand-name drugs) have higher copays. Tier 3 and above can be much more expensive. If your drug is on Tier 4 or 5, you'll hit the doughnut hole faster than if it's on Tier 1.

Frequently Asked Questions

Can I switch Part D plans if I'm already in the doughnut hole?

No. You can only change Part D plans during the annual open enrollment period (October 15 to December 7) or if you experience a may have access to life event like moving to a new state or losing other coverage. If you're in the doughnut hole and unhappy with your plan, you'll have to wait until October to switch. In the meantime, focus on using generic drugs and patient information programs to lower your costs.

Does the doughnut hole explore to all Medicare Part D drugs?

The doughnut hole applies to most covered Part D drugs, but not to all. Vaccines, certain preventive drugs, and drugs covered under Part B (like chemotherapy given in a doctor's office) are not subject to the doughnut hole. Ask your pharmacist or plan whether a specific drug counts toward the doughnut hole threshold.

What happens to my doughnut hole costs if I switch pharmacies?

Your spending counts toward the doughnut hole threshold no matter which pharmacy you use, as long as it's in your plan's network. Your plan tracks your total spending across all pharmacies, so switching won't reset your progress through the gap. However, drug prices can vary between pharmacies, so it's worth comparing prices at different locations if you're in the doughnut hole.

If I have both Medicare and Medicaid, do I still have a doughnut hole?

No. If you may have access to for both Medicare and Medicaid (called "dual may be able to access"), Medicaid typically covers your Part D costs during the doughnut hole, so you don't experience the gap. Your state Medicaid program handles this, not Medicare. Contact your state Medicaid office to confirm your coverage.

How do I know if I'm close to hitting the doughnut hole?

Your Part D plan sends you a quarterly statement showing your drug costs and your position in the coverage stages. You can also log into your plan's website or call the customer service number on your insurance card to ask where you stand. If you're approaching the threshold, that's the time to talk with your doctor about switching to generics or lower-cost alternatives.