How to Get Out of the Donut Hole (Coverage Gap)

Medicare Part D provides prescription drug coverage, but includes a temporary limit on what the plan pays each year, known as the “coverage gap.” This article explains the coverage gap and strategies to manage prescription drug costs.

Understanding the Medicare Part D Coverage Gap

Medicare Part D coverage has four annual phases. The first is the annual deductible, the amount a beneficiary pays out-of-pocket before their plan pays. For 2025, the standard deductible can be up to $590.

After the deductible, beneficiaries enter the initial coverage phase. Here, the plan pays a portion of drug costs, and beneficiaries pay a copayment or coinsurance. This phase continues until the total cost of drugs, including amounts paid by the plan and the beneficiary, reaches $5,450 in 2025. Beneficiaries then transition into the coverage gap.

During the coverage gap, beneficiaries are responsible for a larger percentage of their drug costs. For 2025, individuals pay 25% for both brand-name and generic drugs. Pharmaceutical manufacturers provide a 70% discount on brand-name drugs, and the plan pays 5%; for generic drugs, the plan pays 75%.

Beneficiaries exit the coverage gap and enter the catastrophic coverage phase once their true out-of-pocket (TrOOP) costs reach a threshold. TrOOP includes the deductible, initial coverage phase copayments, and the 25% paid for drugs in the coverage gap. It also counts the manufacturer discount on brand-name drugs received in the gap. For 2025, the out-of-pocket threshold is $8,100. Once met, beneficiaries pay nothing for covered Part D drugs for the rest of the calendar year.

Practical Approaches to Managing Costs

A medication review with a healthcare provider or pharmacist helps manage prescription drug costs. Discussing current prescriptions allows exploration of lower-cost alternatives, such as generic versions or therapeutically equivalent options. Adjusting dosages or exploring different formulations might also lead to cost savings, if medically appropriate and approved by the physician.

Comparing drug prices across pharmacies reveals significant cost variations. Mail-order pharmacies, often associated with Part D plans, provide cost benefits for maintenance medications. Check prices regularly, as they fluctuate.

Some pharmaceutical manufacturers offer patient assistance programs (PAPs) to help afford medications. These programs provide free or low-cost drugs to eligible patients who meet income and insurance criteria. Information about these programs is often found on the manufacturer’s website or through patient advocacy organizations. Applying involves submitting an application with income verification and prescription details.

Prescription drug discount cards offer medication cost savings. These cards are not insurance and provide a negotiated discount at participating pharmacies. Money spent using these cards does not count towards the True Out-of-Pocket (TrOOP) cost for exiting the coverage gap. They reduce immediate out-of-pocket expenses but do not accelerate progress through the Part D phases.

Strategic timing of prescription refills can minimize time within the coverage gap. If a beneficiary is nearing the coverage gap towards the end of the year, they might refill certain prescriptions before the new calendar year begins, when Part D phases reset. This strategy requires careful planning and coordination with healthcare providers to ensure medical appropriateness and avoid treatment disruption.

Exploring Financial Assistance Options

Medicare offers Extra Help, also known as the Low-Income Subsidy (LIS), to assist beneficiaries with limited income and resources with Part D costs. This program reduces or eliminates Part D premiums, deductibles, and copayments. Beneficiaries who qualify for Extra Help do not enter the coverage gap, receiving continuous subsidized coverage.

Eligibility for Extra Help is based on federal poverty levels and asset limits. For 2025, individuals with incomes below approximately 150% of the federal poverty level and limited financial resources qualify. Resources include bank accounts, stocks, and bonds, but not a primary residence or one vehicle. Apply for Extra Help through the Social Security Administration, online, by mail, or in person.

State Pharmaceutical Assistance Programs (SPAPs) provide additional financial help with prescription drug costs. These programs vary by state in eligibility and benefits. Beneficiaries find information about their state’s program by contacting their State Health Insurance Assistance Program (SHIP) or their state’s department of aging services. These programs work with Medicare Part D.

Charitable organizations and foundations provide prescription medication financial assistance. These organizations often focus on specific diseases or conditions, offering grants or direct payment for medication costs. Patients facing high drug expenses can research disease-specific foundations or general patient assistance charities for support.