If you have Medicare or plan to sign up soon, you’ve probably heard of the “Medicare donut hole,” which is what the Medicare Part D prescription drug plan coverage gap is often called.
When Part D started in 2006, the donut hole was a big deal, but not in a good way like an actual donut hole. It was literally a hole in coverage. People who reached the donut hole had to pay the full cost of their prescriptions. And while the Part D coverage gap is going away in 2025, for now, it’s still important to understand what it means for your out-of-pocket costs.
Let’s go through a brief explanation of what the donut hole is, how it works and how you can budget for it.
Is there any insurance that covers the Medicare donut hole?
While the federal government has shrunk the coverage gap, currently there aren’t any Medicare Part D plans without a donut hole, even those included as part of a Medicare Advantage plan. The good news is you now get some help paying the cost for covered drugs in the coverage gap. For instance, some states offer a State Pharmaceutical Assistance Program to help you pay for medicine costs – you can see if there’s one available to you on the official Medicare website. There’s also a federal program offered through Medicare and Social Security, called Extra Help, that helps supplement prescription costs. You can apply for Extra Help before or after enrolling in a Medicare Part D plan.
How the Medicare donut hole works
Medicare Part D is your prescription drug coverage. It’s available to everyone with Medicare Parts A and/or B, but you can only get it through private Medicare health insurance plans. You can enroll in a Part D plan separately or through a Medicare Advantage plan that combines medical and prescription drug coverage in one plan.
Each stage of Part D is like a steppingstone throughout the year. The Medicare Part D donut hole is the third stage. The four stages start over on Jan. 1 of each year.
How long does the Medicare donut hole last?
The amount of time you stay in the Part D coverage gap depends on what and how frequently you pay. Generally, you stay in the donut hole until you pay the set limit that’s determined by Medicare each year. In 2024, you enter the donut hole once you and your plan have spent $5,030 on covered drugs, and you remain in the coverage gap until your out-of-pocket costs reach $8,000.
How to get out of the Medicare donut hole
Once you enter the donut hole, you stay there until you’ve spent a specific amount for covered drugs. (People who qualify for the Extra Help program won’t enter the coverage gap.) This amount changes each year, and it includes:
- What you’ve paid for the deductible, copayments or coinsurance for covered drugs
- The amount of the manufacturer discount for brand-name drugs in the gap
It doesn’t include what you pay for your monthly premium or what your plan paid for covered drugs in the gap. Once you’ve spent the $8,000 maximum amount in the donut hole, you move on to the catastrophic coverage phase.
How to prepare for the Medicare Part D donut hole
If you have a chronic health condition and require daily medicine, you may be more likely to hit the Medicare donut hole. But don’t panic – there are ways you can prepare for this in advance. And even if you don’t think it’ll be a problem for you, life is unpredictable, and having a plan in place can be very helpful.
Here’s how you can prepare.
- If you’re retired and have a fixed income, figure out the cost of your medicine and keep track of the Part D stages. This will help you know how much your medicine will cost while in the coverage gap. Then, if possible, set aside money throughout the year for the cost of your medicines, so you have it when you hit the donut hole.
- Pay close attention to the Explanation of Benefits (EOB) document you get each month from your Medicare plan. It shows how much more money you must spend before you hit the donut hole and, later, how much you have left to spend before you get out of it.
- Take steps to lower your medicine costs. For instance, you can get your regular prescription through the mail in larger quantities at a lower price. And when you see your doctor each year, ask about each of your medicines to see if you still need to take them, if there are cheaper options or if you can take them less often.
Six tips for avoiding the Medicare donut hole
Getting the best prices on medicines is always good, and it may be extra helpful for people on Medicare Part D who hit the donut hole. Some people find that with savvy shopping skills, they can lower their prescription costs enough that they don’t hit the donut hole at all.
These six tips can help you save time, money and frustration when trying to understand Medicare prescription drug costs.
1. Compare Medicare plans each year during open enrollment season
Medicare.gov is the best place to compare plans. Make sure your plan still covers your prescription drugs for the next plan year, check whether the price of your drugs is going up and see whether a different plan could save you money.
2. Talk to your pharmacist to find less expensive options
All Medicare Part D plans include Medication Therapy Management consultations with a pharmacist. They can look at all the prescriptions you take and see whether there are less expensive prescriptions you might be able to take. They may also recommend medication combinations that might work better for you. After the consultation is complete, you can discuss it with your doctor.
If you’re in the Medicare donut hole and nearing the end of the year, ask your pharmacist to help you assess what prescriptions you really need to buy at that time. Do you have enough medicine at home to get you through the end of the year? Could you get a smaller quantity this time?
3. Ask your insurance company if you can get better prices
Did you know you may be able to get better prices on prescriptions at a different pharmacy, by mail or by getting a different quantity (like a 90-day supply instead of a 30-day supply)? Your insurance company can help you find the best option. For instance, if your plan has a Medicare formulary, you may be able to get a formulary medicine at a lower price.
If you need short-term medicine, like a week’s worth of antibiotics for a sinus infection, call your insurance company to ask for the least expensive place to get them instead of just going to the closest drugstore.
If you’re at the pharmacy checkout and your prescription costs more than you think it should, stop and don’t pay for it. You can’t return prescriptions, even if there’s a mistake. Call your insurance company and ask about the cost to make sure it’s right before you finish checking out.
4. Use cost calculators to find the best prices
If you have an online account for your Medicare Part D plan, look for a prescription drug calculator tool where you can put in your prescriptions and their quantities. It’ll tell you how much the covered drug will cost you at different pharmacies. It might not be cheapest at the corner drugstore.
5. Ask local pharmacies if they offer rewards
Ask your local pharmacy if it has a rewards program. It may help you save money on your prescriptions, or you could earn rewards toward other items in the store.
6. Get extra help paying costs
Visit Medicare.gov to learn more about the programs available to help you. Based on your income and resources, you may qualify for help paying Medicare plan premiums, deductibles or prescription drug costs.