What the Doughnut Hole Is and How It Affects Your Costs

The doughnut hole is a coverage gap in Medicare Part D (prescription drug coverage) where you pay more out of pocket for medications. Once you and your plan together spend a certain amount on covered drugs in a calendar year, your coverage temporarily stops — you pay the full cost of prescriptions until your total spending reaches a second threshold, at which point catastrophic coverage kicks in and your costs drop again.

The gap exists because of how Medicare Part D is structured. Your plan covers a portion of drug costs up to an initial limit. After that limit is reached, you enter the doughnut hole and pay a larger share of the cost yourself. This continues until your total out-of-pocket spending (what you actually paid, not what the plan paid) reaches a second limit. Once you cross that limit, catastrophic coverage begins and your costs fall significantly.

The exact dollar amounts change each year. For 2024, the initial coverage limit is $5,850 and the out-of-pocket threshold for catastrophic coverage is $8,550. These numbers are set by Medicare and announced each fall for the following year.

Key Takeaways

  • The doughnut hole is a temporary gap in Part D coverage where you pay a larger share of drug costs after reaching an initial spending limit.
  • The gap closes once your out-of-pocket spending reaches a second threshold, usually several thousand dollars higher than the first.
  • The dollar amounts that trigger the gap and end it change every year, so you should check your plan's materials each fall.
  • Generic drugs typically cost less in the doughnut hole than brand-name drugs, so asking your doctor about generics can reduce your costs.
  • Some people with low incomes or high drug costs may receive subsidies that reduce or eliminate the doughnut hole impact.

How the Three Stages of Part D Coverage Work

Medicare Part D has three distinct cost stages, and understanding where you are in the year helps you predict what you will pay. The first stage is initial coverage, which begins when you enroll. During this stage, you pay a copay or coinsurance (a percentage of the drug cost) for covered medications, and your plan pays the rest. This stage continues until your total drug costs — what you paid plus what the plan paid — reach the initial coverage limit.

Once you hit that limit, you enter the coverage gap (the doughnut hole). Here, you pay a larger percentage of the cost for brand-name drugs and a smaller percentage for generic drugs. Your plan does not pay anything during this stage. You stay in the gap until your out-of-pocket spending alone reaches the catastrophic threshold.

The third stage is catastrophic coverage. Once you reach the out-of-pocket threshold, your costs drop sharply. You pay a small copay or coinsurance for the rest of the year, and your plan covers most of the remaining cost. This stage continues through December 31st, then the cycle resets on January 1st.

Who Hits the Doughnut Hole and Why It Matters

Not everyone enters the doughnut hole in a given year. People who take few medications or inexpensive drugs may never reach the initial coverage limit. However, seniors with chronic conditions requiring multiple medications — such as heart disease, diabetes, or arthritis — often spend enough to enter the gap.

The doughnut hole matters because the costs can be substantial. In the gap, you might pay 25 percent of a brand-name drug's cost instead of a small copay. For expensive medications, this can mean paying $50, $100, or more per prescription. Over several months in the gap, costs add up quickly. This is why some seniors skip doses, cut pills in half, or stop taking medications temporarily to save money — all of which can harm their health.

Knowing you are in the doughnut hole helps you plan. You can ask your doctor about lower-cost alternatives, request generic versions of medications, or look into patient information programs offered by drug manufacturers. Some people also time their prescriptions to avoid the gap or switch to a different Part D plan during the annual enrollment period if their current plan's gap is particularly expensive.

Extra Help and Subsidies That Reduce or Eliminate the Gap

Medicare offers a program called Extra Help (also called the Low-Income Subsidy program) for people with limited income and resources. If you may have access to, Extra Help reduces or eliminates your costs throughout the year, including in the doughnut hole. You pay a small copay for generic drugs and a slightly higher copay for brand-name drugs, even while in the gap.

To be considered for Extra Help, your income must be below a certain level — roughly 150 percent of the federal poverty line, though the exact amount changes yearly. Your resources (savings, investments, property other than your home) must also be below a limit, typically around $8,000 for an individual or $20,000 for a married couple.

You can check whether you might be may be able to access by contacting Social Security at 1-800-772-1213 or visiting the Social Security website. You can also call 1-855-500-3243 to speak with someone who can walk you through the process. If you are already receiving Medicaid or Supplemental Security Income (SSI), you may be automatically enrolled in Extra Help.

Strategies to Manage Costs in the Doughnut Hole

If you enter the doughnut hole, several practical steps can lower what you pay. First, ask your doctor or pharmacist whether a generic version of your medication is available. Generic drugs cost less than brand-name drugs, and the difference is especially noticeable in the gap. If your doctor prescribed a brand-name drug, ask whether switching to the generic is safe for your condition.

Second, review your Part D plan's formulary (the list of covered drugs) to see which medications are in lower cost tiers. Some plans offer preferred generics at lower copays than non-preferred ones. Your pharmacist can tell you which tier your current drugs are in and whether alternatives exist in a lower tier.

Third, look into manufacturer copay information programs. Many drug companies offer cards or programs that reduce what you pay out of pocket, even in the doughnut hole. Your pharmacist or doctor's office can help you find these programs. Fourth, consider whether you can use mail-order or 90-day supplies instead of 30-day refills — sometimes the per-dose cost is lower, which helps in the gap.

Finally, mark your calendar for the annual enrollment period (October 15 to December 7 each year). If your current plan's doughnut hole is expensive, you can switch to a different Part D plan that may have lower gap costs or a different initial coverage limit.

When to Talk to Your Doctor About the Doughnut Hole

If you take multiple medications or expensive drugs, mention the doughnut hole to your doctor at your next visit. Explain that you are concerned about costs once you enter the gap. Your doctor may be able to suggest lower-cost alternatives, adjust your treatment plan, or refer you to a social worker or patient advocate who can help you find financial resources.

You should also talk to your doctor if you have already entered the gap and are thinking about skipping doses or stopping a medication to save money. Never make these changes on your own — some medications are dangerous to stop suddenly, and your doctor needs to know if cost is affecting whether you take your prescriptions as directed.

If you think you might be may be able to access for Extra Help, ask your doctor's office or pharmacist for help contacting Social Security. Many offices have staff who can information with the process or point you to a local organization that helps seniors with Medicare questions.

How the Doughnut Hole Has Changed Over Time

When Medicare Part D began in 2006, the doughnut hole was a complete coverage gap — you paid 100 percent of drug costs while in the gap. Since then, the Affordable Care Act gradually reduced what you pay in the gap. Today, you pay a percentage of the cost rather than the full amount, which is less expensive than it was in the early years of Part D.

The dollar amounts that define the gap also change yearly based on inflation and changes in drug prices. This means the initial coverage limit, the out-of-pocket threshold, and the costs you pay in the gap are different each year. Medicare announces these amounts in the fall, and your plan sends you updated information before the new year begins.

Because the amounts change, it is important to review your plan's materials each year rather than assuming your costs will be the same as they were the previous year. A medication that cost you $30 per month in the gap last year might cost more or less this year depending on the new thresholds and your plan's pricing.

Frequently Asked Questions

Can I avoid the doughnut hole by choosing a different Part D plan?

Different plans have different initial coverage limits and gap costs, so switching plans during the annual enrollment period (October 15 to December 7) may reduce your gap costs. However, you cannot avoid the gap entirely unless you have very low drug costs or may have access to for Extra Help. Compare plans based on your specific medications to find one with lower gap costs for the drugs you take.

Does the doughnut hole reset on January 1st?

Yes. All spending counts toward the doughnut hole thresholds only during the calendar year (January 1 to December 31). On January 1st, the counters reset and you start fresh in the initial coverage stage. If you are in the gap in December, you will return to the initial coverage stage in January.

What happens if I reach catastrophic coverage before the year ends?

Once you reach catastrophic coverage, you stay in that stage for the rest of the calendar year. Your costs remain low (usually a small copay) for any covered medications you fill. The catastrophic coverage stage ends on December 31st, and you return to initial coverage on January 1st of the next year.

Do all Part D plans have the same doughnut hole costs?

No. Plans vary in how much you pay in the gap. Some plans have lower gap costs for generic drugs, while others may have different initial coverage limits. Comparing plans during the annual enrollment period based on your actual medications can help you find a plan with lower gap costs for your situation.

If I have both Medicare and Medicaid, do I still pay for the doughnut hole?

If you have both Medicare and Medicaid (called "dual may be able to access"), Medicaid typically covers your costs in the doughnut hole, so you pay little or nothing. Contact your Medicaid office to confirm your coverage, as rules vary by state.