Part D
What Is the Medicare Part D “Donut Hole”?
- January 12, 2024
- Reviewed by John Krahnert
It may seem strange to draw a parallel between Medicare and donuts. However, the comparison can be used to illustrate the idea that in some cases, Medicare prescription drug plan beneficiaries can encounter a gap in coverage (i.e., the Medicare donut hole) at some point during your plan year.
Qualified beneficiaries can get Medicare prescription drug coverage through a Part D plan (PDP) or through a Medicare Advantage plan that includes Part D coverage (called a Medicare Advantage Prescription Drug plan, or MA-PD). It’s important for Medicare beneficiaries to understand how the Medicare Part D donut hole affects drug costs.
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What is the donut hole in Medicare?
There are four Medicare Part D coverage stages, and the donut hole is another term for one of these stages of coverage.
- Your first Medicare Part D coverage phase can be represented by the left side of the donut ring. On this side of the donut, you pay the entire amount for your prescription drugs until you meet your deductible (assuming a deductible applies to your drug). This first coverage phase is called the deductible period where you pay the full negotiated price for covered prescription drugs.
- After you meet your deductible (which can be no higher than $545 in 2024) you move to your initial coverage period. This is the phase when you start paying a copayment or coinsurance for covered drugs. The coinsurance amount varies depending on the drug’s cost and assigned tier level.
- After you and your drug plan have combined to spend a set amount for the prescription drugs covered by your plan ($5,030 in 2024), you move into the center of the donut (i.e., the donut hole) which is your Medicare coverage gap.
While you’re in the donut hole coverage gap, you’re responsible for 25% of your prescription drug costs for both brand name and generic drugs. - Once you and your plan have combined to spend a total of $8,000 on covered drugs in 2024, you move to the right side of the donut ring where your catastrophic coverage period kicks in. Starting in 2024, you won't pay copays and coinsurance for your prescription drugs for the rest of the year once you enter the catastrophic coverage phase.
Finally, your policy period ends on December 31, and your Medicare Part D plan resets on January 1. In other words, time for your next donut.
What is the Medicare donut hole for 2024?
The Medicare donut hole for 2024 starts once you reach $5,030 in out-of-pocket prescription drug costs, and it ends after you’ve spent $8,000. If your prescription drug spending reaches $8,000 in 2024, you’ll have catastrophic coverage for the rest of the year.
Did the Medicare donut hole go away in 2020?
No. The Medicare donut hole still exists. However, starting in 2020, instead of being responsible for 37% of the cost of generic prescription drugs and 25% of the cost of brand name prescription drugs while in the donut hole (as was the case in 2019), Medicare beneficiaries only pay 25% for both brand name and generic drugs.
Previously, when Medicare Part D was first rolled out in 2007 and prior to the Affordable Care Act, beneficiaries paid 100% of drug costs while in the donut hole.
Can I avoid the Medicare donut hole?
You can avoid the Medicare donut hole if your out-of-pocket expenses for prescription drugs total less than $5,030 in 2024. Once you hit that amount, you enter the Medicare coverage gap.
You might be able to pay lower out-of-pocket prescription drug costs if your doctor switches you from a brand name drug to a generic drug or from a brand name to a less expensive brand name drug, if possible. Ask your physician whether this is possible based on your specific medical condition and health history.
Another option is to use mail-order pharmacies or take advantage of Pharmaceutical Assistance Programs available in your state or by the company that makes your drug.
People with specific income and resource limits may qualify for the Extra Help program, in which case they will not enter the donut hole. The Extra Help program is a government program, and you can contact Social Security toll-free for help completing the application by calling 1-800-772-1213 (TTY 1800-325-0778).
If you want more information about the Extra Help program, you can also call 1-800-MEDICARE (TTY 1-877-486-2048) or visit Medicare.gov.
How can I get out of the Medicare donut hole once I’m in it?
As your out-of-pocket spending adds up, you’ll eventually move out of the donut hole and into the catastrophic coverage phase after you’ve spent $8,000 on covered drugs in 2024.
Compare Medicare prescription drug coverage options
Request a free online plan comparison or call to speak with a licensed insurance agent and find out if any Medicare prescription drug coverage options available where you live cover your drugs.
We represent carriers such as Humana, UnitedHealthcare®, Anthem Blue Cross and Blue Shield, Aetna, Cigna Healthcare, Wellcare, or Kaiser Permanente.
About the author
Lisa Eramo is an independent health care writer whose work appears in the Journal of the American Health Information Management Association, Healthcare Financial Management Association, For The Record Magazine, Medical Economics, Medscape and more.
Lisa studied creative writing at Hamilton College and obtained a master’s degree in journalism from Northeastern University. She is a member of the American Health Information Management Association, American Academy of Professional Coders, Society of Professional Journalists, Association of Health Care Journalists and the American Society of Journalists and Authors.
Lisa currently resides in Cranston, Rhode Island with her wife and two-year-old twin boys.
Website: LisaEramo.com
LinkedIn: Lisa Eramo
Twitter: @Lisa_Eramo
