Donut Hole
⚠️ Important 2026 Update: The Donut Hole No Longer Exists
The Medicare Part D Coverage Gap (the “donut hole”) was permanently eliminated on January 1, 2025, under the Inflation Reduction Act. Part D now has a hard annual out-of-pocket cap of $2,100 in 2026 (up from $2,000 in 2025). Once your out-of-pocket spending reaches that cap, you automatically enter catastrophic coverage and pay $0 for covered drugs for the rest of the calendar year.
The historical information below describes how the donut hole worked before 2025 and is preserved here for reference only. It no longer applies to current Part D plans. See our Part D Costs page for the current 2026 structure.
The Part D Coverage Gap (Donut Hole) — Historical Reference
Note: The information below describes how the Part D coverage gap operated prior to its elimination on January 1, 2025. It is preserved for historical reference and no longer applies to current Part D plans.
The Part D coverage gap was also referred to as the donut hole. While somewhat confusing, it was important for Part D plan holders to understand how it worked because it could greatly impact the out-of-pocket expenses associated with prescription drug coverage.
What is the coverage gap?
The coverage gap was part of every Part D plan prior to 2025. Put simply, it was a “gap” in prescription drug coverage where the member would pay more for prescription drugs.
How did the coverage gap work?
Medicare beneficiaries would find themselves in the coverage gap when the plan’s initial coverage limit had been met – when the total prescription costs reached $5030.
Once in the donut hole, beneficiaries received a 75% discount on name-brand drugs and a 63% discount on generic medications. While this seemed like a significant discount, the member’s out-of-pocket portion was much higher than before they were in the coverage gap.
The coverage gap remained in effect until the member had paid $8000 for prescription drugs. At that point, catastrophic coverage began. Once in catastrophic coverage, the member was only responsible for 5% of the prescription cost. This lasted until the end of the year.
Items that counted towards the coverage gap were the yearly deductible, coinsurance, copayments, and the discount you got on brand-name drugs in the coverage gap. What you paid in the coverage gap was also relevant.
Items that didn’t count toward the coverage gap were the drug plan premium, the pharmacy dispensing fee and the amount you would pay for drugs that aren’t covered.
Tips That Were Used to Avoid the Medicare Part D Coverage Gap
Sometimes there was simply nothing that could be done to avoid the coverage gap. However, there were a few things that members could try to avoid the donut hole.
First, be sure to have your drug plan reviewed every year. While it may work great in the current year, the upcoming year’s changes could mean that you find yourself in a different coverage situation next year, even though your medications didn’t change.
Second, use generic medications whenever possible. This helps extend the life of your initial coverage limit.
Third, compare prices across pharmacies. Each drug plan will have a list of pharmacies that are preferred, meaning that those pharmacies will generally offer lower prices than standard pharmacies. Using a preferred pharmacy will decrease your out-of-pocket expenses for prescription medications.
Fourth, try using mail-order medications or ordering your medications online. Sometimes this comes with a discount.
Fifth, call the drug manufacturer directly and ask for a discount or coupon. Many times, they will give these to consumers who ask for them.
Lastly, you can apply to the Extra Help program. This program offers financial assistance with Part D premiums, deductibles, and copays.
Part D Straddle Claims
A Part D straddle claim was one in which the medication “straddled” two coverage phases. For example, if you had $5 left in your initial coverage phase, but the medication was $10, that medication was a straddle claim since it actually put you into the next phase of coverage, the donut hole.
In that case, the individual’s expense was not clear. When this happened, the plan would calculate what the individual owed using the coverage gap discount and the dispensing fee for the prescription.
Medicare Advantage Drug Plans and the Coverage Gap
Medicare Advantage (Part C) plans that include prescription drug coverage historically included the traditional coverage gap. However, a Medicare Advantage plan might still cover some of the generic medications while in the coverage gap. If it did, payment for those generic medications did not go towards the total out-of-pocket expense to get out of the coverage gap and into catastrophic coverage.
Coverage Gap Prescription Assistance
Medicare offers the Extra Help program for individuals with low incomes and who meet certain requirements. The program is offered individually through each state and can help pay for some or all of an individual’s prescription expenses.
If the individual is not eligible for the Extra Help program, they can also speak to their medical provider about switching to different medications. While this is not always possible, there may be times when a cheaper medication is an option. Of course, you and your doctor will need to decide if that medication is just as effective.
