What the Donut Hole Is
The donut hole is a gap in Medicare Part D prescription drug coverage where you pay the full cost of your medications yourself for a period each year. It happens after you and your insurance plan together spend a certain amount on covered drugs — in 2024, that threshold is $5,850. Once you hit that spending level, your plan stops paying its share, and you pay 100% of the drug price until your total out-of-pocket costs reach a second threshold (in 2024, that's $8,550). After you cross that second threshold, your plan resumes paying most of the cost.
The gap exists because of how Medicare Part D was designed. Your plan covers some costs, you pay a copay or coinsurance, and manufacturers sometimes contribute discounts. But once combined spending hits that first number, those contributions pause — leaving you in the "donut hole" until you've paid enough out of pocket to reach catastrophic coverage.
Key Takeaways
- The donut hole begins in 2024 when you and your plan have spent $5,850 together on covered drugs, and it ends when your out-of-pocket costs reach $8,550.
- While in the donut hole, you pay the full price of medications, though drug manufacturers are required to offer discounts on brand-name drugs.
- The exact dollar amounts change each year, so you should check your plan's summary of benefits or call your insurer to learn the current thresholds.
- Once you exit the donut hole and reach catastrophic coverage, your plan pays 80% of most drug costs for the rest of the year.
- People with low incomes may receive subsidies that reduce or eliminate the donut hole gap.
How the Donut Hole Works During the Year
Your Part D plan tracks spending in stages. In the first stage, you pay your monthly premium and a copay or coinsurance for each prescription. Your plan pays its share. Both amounts count toward the $5,850 threshold. Once that combined total is reached, you enter the donut hole.
Inside the donut hole, you are responsible for paying the full retail price of each drug — but manufacturers must offer a discount on brand-name medications. Generic drugs do not have a manufacturer discount requirement, so you pay the full price with no reduction. You continue paying until your own out-of-pocket costs (not including what your plan paid earlier) total $8,550. At that point, you move into catastrophic coverage, where your plan covers 80% of most drugs and you pay 20%.
This cycle resets on January 1 each year. If you reach catastrophic coverage in November, the counters start over in January, and you begin paying copays again in the initial coverage stage.
The Donut Hole Has Shrunk Over Time
When Part D began in 2006, the donut hole was much wider and more expensive for beneficiaries. The Affordable Care Act gradually reduced it by requiring manufacturers to offer larger discounts on brand-name drugs and by lowering the out-of-pocket threshold needed to reach catastrophic coverage.
In 2024, brand-name drugs in the donut hole are discounted by manufacturers, so you typically pay 25% of the price instead of 100%. Generic drugs still require you to pay the full price. These discounts have made the donut hole less financially damaging than it was in earlier years, but it remains a significant cost for people taking multiple or expensive medications.
Who Pays What in the Donut Hole
| Stage | Your Spending Level | You Pay | Plan Pays |
|---|---|---|---|
| Initial Coverage | $0 to $5,850 combined spending | Copay or coinsurance | Its share of the drug cost |
| Donut Hole | $5,850 to $8,550 out-of-pocket | Full price (with manufacturer discount on brand-name drugs) | Nothing |
| Catastrophic Coverage | Over $8,550 out-of-pocket | 20% of cost | 80% of cost |
How to Know If You Will Hit the Donut Hole
Review your current medications and their costs. If you take several brand-name drugs or expensive generics, you may reach the $5,850 threshold by mid-year or earlier. Your Part D plan sends you a notice each year showing the thresholds and your progress toward them. You can also call your plan directly and ask them to estimate whether you will enter the donut hole based on your current prescriptions.
If you think you will hit the donut hole, talk to your doctor about lower-cost alternatives. Some generic drugs work as well as brand-name versions but cost much less. Your plan's formulary — the list of covered drugs — shows which medications are in each tier and what your copay will be. Switching to a lower-tier drug before you reach the donut hole can save you thousands of dollars.
Subsidies That Reduce or Eliminate the Donut Hole
If your income is low enough, you may receive a Low-Income Subsidy (LIS), also called "Extra Help." This program reduces or eliminates your copays, coinsurance, and the donut hole itself. People with incomes up to 150% of the federal poverty level may be may be able to access. In 2024, that means roughly $21,870 per year for a single person, though the exact amount varies by state.
You do not have to be on Medicaid to receive LIS. Social Security will automatically check your income and enroll you if you may have access to. If you think you might be may be able to access, contact Social Security at 1-800-772-1213 or visit your local Social Security office. The program can save you hundreds or thousands of dollars per year.
Strategies to Manage Donut Hole Costs
If you are in the donut hole, ask your pharmacist about generic alternatives to your current medications. Many brand-name drugs have generic versions that work identically but cost less. Your doctor can also request prior authorization for a lower-cost drug if your plan requires it.
Some pharmaceutical manufacturers offer patient information programs that provide free or reduced-cost drugs to people who cannot afford them. You can search for these programs on the manufacturer's website or ask your doctor's office for help. Additionally, nonprofit organizations like the Patient Advocate Foundation and NeedyMeds maintain databases of information programs organized by drug name.
If you are taking multiple medications, ask your doctor whether any can be discontinued or combined. Some people take drugs that duplicate each other's effects, and stopping one can reduce costs without affecting your health. Your pharmacist can also review your medications for interactions and redundancy.
Frequently Asked Questions
Does the donut hole reset if I switch to a different Part D plan mid-year?
No. Your spending counts toward the donut hole threshold regardless of which plan you are in. If you switch plans, your new plan receives a record of what you have already spent, and the counter continues from where it left off. You cannot reset the donut hole by changing plans.
What counts toward the donut hole threshold?
Only covered drugs under your Part D plan count. Over-the-counter medications, drugs not on your plan's formulary, and prescriptions filled outside your plan do not count. Your plan's summary of benefits lists which drugs are covered and in which tier.
Can I get help paying for drugs while I am in the donut hole?
Yes. Manufacturer information programs, nonprofit organizations, and state pharmaceutical information programs all offer help. Your doctor's office or pharmacist can help you find programs for your specific medications. If your income is low, the Low-Income Subsidy program eliminates the donut hole entirely.
Do the donut hole thresholds change every year?
Yes. Medicare adjusts the dollar amounts annually based on inflation. The 2024 thresholds are $5,850 and $8,550, but these will be different in 2025. Your plan will send you updated information in the fall, or you can call your plan to ask about the current year's thresholds.
What happens to my donut hole progress if I stop taking a medication?
Your spending stays on the record. If you have already spent $4,000 toward the threshold and then stop taking a drug, you still need to spend $1,850 more in covered drugs to reach the donut hole. The counter does not reset or go backward during the year.