Donut Hole
The donut hole (coverage gap) is a temporary limit on what the drug plan will cover. Once you reach this limit, you pay a higher percentage of drug costs until you reach catastrophic coverage.
Understanding Donut Hole
The donut hole (coverage gap) is a temporary limit on what your Medicare drug plan will cover. It begins after you and your plan have spent a certain amount on covered drugs ($5,030 in 2024) and ends when you reach catastrophic coverage.
During the coverage gap, you pay 25% of the cost for both brand-name and generic drugs. The amounts you pay count toward reaching the catastrophic coverage threshold.
Once your total out-of-pocket costs reach the catastrophic coverage limit ($8,000 in 2024), you'll pay only a small coinsurance or copay for covered drugs for the rest of the year.
The Inflation Reduction Act is phasing in changes that will eliminate the coverage gap and cap Part D out-of-pocket costs at $2,000 starting in 2025.
Frequently Asked Questions
Does the donut hole still exist?
The donut hole has been largely eliminated. Starting in 2025, Part D out-of-pocket costs are capped at $2,000 annually, meaning you won't face the high costs traditionally associated with the coverage gap.
How do I know when I enter the donut hole?
Your Part D plan sends notices when you approach and enter the coverage gap. You can also track your spending through your plan's member portal or Medicare.gov.
Related Terms
Part D
Medicare Part D is prescription drug coverage. You can get it through a standalone Prescription Drug Plan (PDP) or through a Medicare Advantage plan that includes drug coverage.
Formulary
A formulary is a list of prescription drugs covered by a Medicare drug plan. Drugs are organized into tiers, with different cost-sharing for each tier.
Coinsurance
Coinsurance is the percentage of costs you pay for covered services after you've met your deductible. For example, if your coinsurance is 20%, you pay 20% and Medicare pays 80%.
Copayment
A copayment (copay) is a fixed amount you pay for a covered service, like $20 for a doctor visit. Different services may have different copayments.
Need Help Understanding Your Options?
A licensed Medicare advisor can explain how donut hole applies to your specific situation.
Get a Free Medicare Review