When Does the Medicare Donut Hole End?
Unravel Medicare Part D's prescription drug "donut hole." Understand how coverage progresses, when the gap concludes, and how to track your path to lower costs.
Medicare Part D prescription drug coverage helps beneficiaries manage medication costs. This optional program is provided by private insurance companies approved by Medicare. A key aspect of Part D, the “donut hole” or coverage gap, historically limited drug coverage but has undergone significant changes. Understanding Part D’s structure, including the evolution of this gap, clarifies prescription drug cost management.
Understanding Medicare Part D Coverage Phases
Medicare Part D coverage has distinct phases for sharing prescription drug costs. The first is the deductible period, where beneficiaries pay 100% of their drug costs until an annual deductible is met. For 2025, the standard deductible is $590, though some plans may offer a lower or zero deductible. Once met, beneficiaries transition into the initial coverage phase.
In the initial coverage phase, the Part D plan helps pay for covered prescription drugs, with beneficiaries paying a copayment or coinsurance. Individuals are responsible for 25% of their drug costs. This cost-sharing continues until a total amount has been spent on covered drugs by both the beneficiary and the plan.
Historically, after the initial coverage phase, beneficiaries entered the coverage gap, or “donut hole,” paying a higher percentage of drug costs. Reforms, particularly under the Inflation Reduction Act, changed this phase. As of January 1, 2025, the Medicare Part D coverage gap is eliminated, meaning beneficiaries will no longer experience a change in their cost-sharing when moving from the initial coverage phase. This simplifies the benefit structure, leading directly into the catastrophic coverage stage once an out-of-pocket spending threshold is reached.
Reaching the Catastrophic Coverage Stage
With the coverage gap eliminated, beneficiaries now transition directly from the initial coverage phase to the catastrophic coverage stage once their True Out-of-Pocket (TrOOP) spending reaches a threshold. TrOOP represents the total amount a Medicare beneficiary has paid for covered prescription drugs. For 2025, the annual out-of-pocket spending cap for Part D beneficiaries is $2,000.
Various costs contribute to reaching the TrOOP threshold. Payments towards the annual deductible, along with copayments and coinsurance paid during the initial coverage phase, count towards TrOOP. Manufacturer discounts for brand-name drugs previously applied in the coverage gap also counted toward TrOOP. Payments made on a beneficiary’s behalf by programs like Extra Help or State Pharmaceutical Assistance Programs also count towards TrOOP.
Expenses such as monthly premiums, pharmacy dispensing fees, or costs for drugs not covered by the plan’s formulary do not count towards the TrOOP threshold. Upon entering the catastrophic coverage stage in 2025, beneficiaries pay $0 for covered prescription drugs for the remainder of the calendar year. This provides financial relief for individuals with high prescription drug costs.
How to Track Your Out-of-Pocket Costs
Monitoring out-of-pocket prescription drug spending helps understand your progress toward the catastrophic coverage threshold. A primary method for tracking these costs is through Explanation of Benefits (EOB) statements from your Medicare Part D plan. These statements are sent regularly, detailing your drug spending, including contributions toward your deductible, initial coverage limit, and the out-of-pocket threshold.
Many Medicare Part D plans also offer online portals where beneficiaries can track their prescription drug spending in real time. These tools provide a view of accumulated costs, making it easier to see progress toward the catastrophic coverage stage. These resources can help with financial planning for prescription expenses.
For direct updates on your spending, contact your Medicare Part D plan directly. A plan representative can clarify your current out-of-pocket expenses and answer questions about your coverage. This ensures accurate information regarding your progress toward the annual out-of-pocket cap.