What is the Medicare Part D Donut Hole or Coverage Gap?

What is the Medicare Part D Donut Hole or Coverage Gap?

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The Medicare Part D donut hole is an interim phase in all Medicare prescription drug plans when you pay a higher share of your prescription drug costs. You reach the donut hole stage when you and your plan have paid $4,430 in drug costs.

During the coverage gap, or donut hole, you pay 25% of the cost of your prescription medications until your total expenses reach $7,050. (Before 2019, you paid 100% of your drug costs during the gap, making it a true "hole" or gap in coverage.)

What is the Medicare Part D donut hole?

The Medicare Part D donut hole is one of four phases of Medicare prescription plans. It's a temporary gap — or "hole" — in the middle of your drug coverage during the calendar year.

The four drug coverage phases, including the donut hole, apply to both Medicare Part D and Medicare Advantage (Part C) plans.

You enter the donut hole when your total drug costs, including what you and your plan have paid, reach a certain dollar limit. In 2022, that amount is $4,430. While in the donut hole, you pay 25% of your prescription costs until you meet the cost threshold for the next phase.

How does the Medicare Part D donut hole work?

The donut hole applies to every Medicare recipient, whether you get your drug benefit through a Medicare Advantage (Part C) or standalone Medicare Part D plan. All Medicare prescription plans have the same four coverage phases, including the donut hole. These phases renew on Jan. 1 and run through Dec. 31 of each year.

The first two phases of your drug plan are the deductible and the initial coverage period. After you and your plan spend $4,430 in covered drug costs, you enter the third phase, which is the donut hole. During this period, you pay 25% of your generic and brand-name prescription costs.

The donut hole discount only applies to certain drugs covered by your plan unless your insurer approves a request to cover a broader list.

The list of prescription drugs covered is called a formulary and can be found through your insurer.

Medicare keeps track of your drug costs while you're in the donut hole. When your total spending reaches $7,050, you exit the gap and enter the final phase, which is the catastrophic coverage period. In this phase, you pay either 5% of the cost for each prescription, or a flat fee of $3.95 for generics and $9.85 for brand-name drugs (whichever is greater). This phase continues through the end of the year.

Medicare Part D cost-sharing phases

There are four phases of cost-sharing. Out-of-pocket costs charged during each period will vary by plan and usually change yearly. During the coverage gap, or donut hole, you pay more for prescriptions until you spend enough to qualify for the catastrophic period.

donut hole

Initial deductible

You pay the full price for prescriptions until you reach the amount specified in your policy. At most, your deductible for 2022 will be $480.

Initial coverage period

The initial coverage period starts after you meet your plan deductible. During the initial coverage period, you pay your normal prescription copays and coinsurance until total costs (paid by both you and your insurer) reach $4,430.

Donut hole (coverage gap)

You pay 25% toward all generic and brand-name prescriptions until your combined payout for all phases totals $7,050.

Catastrophic benefit period

During this final phase, you pay either a copay or 5% coinsurance for prescriptions (whichever is greater) until the end of the calendar year.

Ways to reduce prescription costs

There are programs available to help cover prescription costs over what Part D provides, if you need them. Below are some options that might fit your needs.

  • Extra Help program: This Medicare program pays toward out-of-pocket drug costs like premiums, deductibles, copays and coinsurance. With Extra Help, you're also exempt from late enrollment fees and Part D donut hole costs.
  • State Pharmaceutical Assistance Programs: Use this resource to see if a program is available in your state.
  • Patient assistance programs, or PAPs: Drug companies offer these programs to help with drug costs if you qualify based on income.
  • Generic drug substitutions: Your doctor or pharmacist may be able to substitute a generic for an expensive brand-name medication.
  • Pay for your drugs out of pocket without using your insurance. Some drugs actually may cost less if you pay for them outright. If the cost with insurance seems high, ask your pharmacist whether the manufacturer's price is cheaper. Keep in mind that drugs you buy outside your insurance plan won't reduce your deductible or help get you out of the donut hole. It's best to ask your insurance company to guide you through this decision.

Frequently asked questions

Why does Medicare Part D have a donut hole?

The Medicare Part D donut hole was created to keep overall costs down for both Medicare and Medicare enrollees. To reduce your own drug costs during the donut hole period, you may want to consider generic prescriptions or drug alternatives if your doctor recommends them.

How will I know when I reach the donut hole phase?

Each month that you fill a prescription, your insurance plan mails you an Explanation of Benefits (EOB), which shows how much you have spent on covered drugs and if you’ve reached the donut hole. The EOB shows your total drug spending to date, which can help you prepare for an upcoming coverage gap.

Are there Medicare Part D plans without a donut hole?

There are no Medicare Part D plans without a coverage gap, so anyone who reaches the $4,430 cost threshold in 2022 will enter the donut hole. But people with low incomes may qualify for special programs to reduce their overall prescription costs through all phases of your drug plan.

Can I get insurance to cover the donut hole?

No, you can't get separate insurance to cover the donut hole as no such plans are available. During the donut hole period, you'll pay 25% of the cost of your prescriptions until your costs reach $7,050 and you move on to the catastrophic benefit phase.

Methodology and sources

Medicare Part D definitions, coverage phases and costs were sourced from Medicare's website, Medicare.gov. Information about the Extra Help program also was obtained from Medicare.gov.

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