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 yourself. It starts after you and your insurance plan together have spent a certain amount on covered drugs — in 2024, that amount is $5,850. Once you hit that threshold, you enter the donut hole and stay there until your out-of-pocket spending reaches $8,550 for the year.

During the donut hole, you are responsible for a larger share of the drug cost. The exact percentage depends on your plan, but you typically pay 25 percent of the brand-name drug price and 25 percent of the generic drug price. This can make medications significantly more expensive during this period, which is why many people find their costs spike suddenly in the middle of the year.

Once your out-of-pocket costs reach the $8,550 limit, you move into catastrophic coverage, where Medicare and your plan cover most of the cost again. The donut hole closes at the end of the calendar year, and your coverage resets on January 1st.

Key Takeaways

  • The donut hole begins after combined spending on covered drugs reaches $5,850 in 2024, and you exit it once your out-of-pocket costs hit $8,550.
  • During the donut hole, you pay approximately 25 percent of the cost for both brand-name and generic drugs, making medications more expensive than before or after the gap.
  • Catastrophic coverage kicks in once you reach the $8,550 out-of-pocket threshold, and Medicare covers most costs for the rest of the year.
  • The dollar amounts that trigger the donut hole change each year, so checking your plan's current thresholds helps you plan medication costs.
  • Switching to lower-cost generic drugs or using manufacturer coupons during the donut hole can reduce what you pay out of pocket.

How the Donut Hole Affects Your Monthly Costs

Your costs do not rise gradually as you approach the donut hole — they jump suddenly once you cross the threshold. If you are taking multiple medications, you may notice the change when ready when you pick up your prescriptions. A drug that cost you $15 in copayments during the first part of the year might cost you $40 or more once you enter the donut hole, depending on the drug's full price.

The impact is steeper for people taking expensive brand-name medications. Generic alternatives are usually cheaper, but you still pay 25 percent of their cost during the donut hole. Some people respond by skipping doses, cutting pills in half, or delaying refills to stretch their budget — practices that can harm your health and are worth discussing with your doctor before you do them.

If you take medications year-round, you can estimate roughly when you will hit the donut hole by tracking your spending from January onward. Many people find that they enter the gap in late summer or early fall, depending on how many drugs they take and the prices of those drugs.

Strategies to Lower Your Costs in the Donut Hole

One of the most direct ways to reduce donut hole costs is to switch to generic versions of your medications if your doctor agrees they will work for you. Generics cost less than brand-name drugs, and you still pay only 25 percent of that lower price during the donut hole. Ask your doctor or pharmacist whether a generic option exists for each of your medications.

Manufacturer coupons and patient information programs can also help during the donut hole. Many drug makers offer coupons that reduce your out-of-pocket cost, and some programs help uninsured or underinsured people pay for medications. Your pharmacist can tell you which programs are available for your specific drugs, or you can search the manufacturer's website.

Some people choose to use a mail-order pharmacy or a 90-day supply option if their plan offers it, since buying in bulk can sometimes lower the per-dose cost. Others time their refills strategically — for example, asking their doctor to write a prescription that lasts until after the donut hole closes, if medically appropriate. Talk to your doctor and pharmacist about which options make sense for your situation.

The Difference Between the Donut Hole and Catastrophic Coverage

Once you leave the donut hole and enter catastrophic coverage, your costs drop sharply. In catastrophic coverage, you typically pay only 5 percent of the cost of covered drugs, and Medicare and your plan cover the rest. This is a much better deal than the 25 percent you pay in the donut hole, which is why many people feel relief once they cross that $8,550 threshold.

Catastrophic coverage lasts from the time you reach the $8,550 out-of-pocket limit through the end of the calendar year. On January 1st, your coverage resets, your out-of-pocket costs go back to zero, and you start the cycle again. If you take expensive medications, you may cycle through all three stages — initial coverage, donut hole, and catastrophic coverage — every single year.

Income-Based Help During the Donut Hole

If your income is low enough, you may be able to get help paying for drugs during the donut hole through the Extra Help program, officially called the Low-Income Subsidy. This program is run by Social Security and helps people with limited income and resources pay Medicare Part D premiums, deductibles, and copayments.

To learn whether you may have access to for Extra Help, you can contact Social Security at 1-800-772-1213 or visit ssa.gov. You can also ask your local Area Agency on Aging or a Medicare counselor to help you understand whether you are may be able to access. The income limits vary by state and change each year, so it is worth checking even if you were turned down in the past.

If you receive Medicaid or Supplemental Security Income (SSI), you may automatically may have access to for Extra Help. The program can significantly reduce what you pay during the donut hole, sometimes eliminating it entirely for people with the lowest incomes.

Planning Ahead to Manage Donut Hole Costs

One of the best ways to manage the donut hole is to plan for it before the year begins. When you are choosing a Medicare Part D plan during the annual enrollment period (October 15 through December 7), look at the plan's formulary — the list of covered drugs — and check the prices for your specific medications. Some plans have lower donut hole costs than others, and picking the right plan can save you hundreds of dollars.

You can use the Medicare Plan Finder tool at medicare.gov to compare plans side by side and see estimated costs for your drugs throughout the year, including what you will pay in the donut hole. This tool shows you the total you might spend in each stage of coverage, which helps you choose a plan that fits your budget.

If you already have a plan and know you will hit the donut hole, talk to your doctor now about whether lower-cost alternatives exist for your medications. Some doctors are willing to switch you to generics or different drugs that work similarly but cost less. The earlier you make these changes, the more money you can save over the course of the year.

Frequently Asked Questions

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

Yes, all standard Medicare Part D plans have a donut hole. However, some plans offer enhanced coverage that reduces or eliminates the gap, though these plans usually charge higher premiums. When comparing plans, check whether the plan offers gap coverage and what it costs.

What counts toward the donut hole threshold?

Only the cost of covered drugs counts toward the $5,850 threshold. This includes what you pay as copayments or coinsurance, plus what your insurance plan pays. Over-the-counter medications and drugs not on your plan's formulary do not count.

Can I avoid the donut hole by choosing a different plan?

You cannot avoid the donut hole entirely, but you can choose a plan with lower costs during the gap. Some plans charge lower copayments in the donut hole, or offer gap coverage that helps pay your costs. Compare plans using the Medicare Plan Finder to see which option costs least for your specific medications.

What happens to my donut hole progress if I switch plans mid-year?

Your spending with your old plan does not carry over to a new plan. If you switch plans, your out-of-pocket costs reset to zero with the new plan, and you start working toward that plan's donut hole threshold again. Switching mid-year can sometimes help, but it can also hurt — talk to a Medicare counselor before you make the change.

Do insulin costs count differently in the donut hole?

Starting in 2024, Medicare limits what you pay for insulin to $35 per month, even during the donut hole. This applies to all insulin covered by Medicare Part D, regardless of which plan you use. Other medications do not have this price cap.