Costs
Donut Hole
Quick answer
The 'donut hole' was a coverage gap in Part D drug plans where beneficiaries paid a higher share of drug costs after early-year spending. The Inflation Reduction Act effectively closed it starting in 2025 with a hard annual out-of-pocket cap.
Plain-English definition
Under the old structure, after initial coverage you entered a gap, then a catastrophic phase. Today, once you hit the annual out-of-pocket cap, you pay $0 for covered drugs for the rest of the year.
Why it matters
Old materials still mention the donut hole. Know that Part D now has a firm out-of-pocket ceiling.
A simple example
You reach the annual Part D out-of-pocket cap in September. From October through December, covered drugs cost $0.
Common mistakes & misconceptions
Related terms
Coverage Gap
The Coverage Gap was the middle phase of the old Part D benefit structure — historically called the donut hole. It has been replaced by a single annual out-of-pocket cap under the Inflation Reduction Act.
Catastrophic Coverage
Catastrophic Coverage is the final phase of Part D. Once your out-of-pocket drug spending reaches the annual cap, you pay $0 for covered drugs for the rest of the calendar year.
Medicare Part D
Medicare Part D is prescription drug coverage sold by private insurance companies approved by Medicare. You get it either as a stand-alone drug plan (PDP) with Original Medicare or bundled inside most Medicare Advantage plans.
Frequently asked questions
Is the donut hole gone?+
The traditional donut hole was replaced by a hard annual out-of-pocket cap.
Sources & references
📚 Where this information comes from
- Medicare.gov — official U.S. government site for people with Medicare ↗Primary source for benefits, enrollment periods, and plan comparison.
- CMS.gov — Centers for Medicare & Medicaid Services ↗Federal rulemaking, program updates, and official guidance.
- Social Security Administration — Medicare enrollment & premiums ↗Enrollment, premium withholding, and IRMAA determinations.
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We help compare Medicare Advantage plans from the insurance companies we represent, and we don't offer every plan available in your area.
Medicare Caddies is an independent insurance agency. We are not affiliated with, endorsed by, or connected to the U.S. government, the federal Medicare program, or the Centers for Medicare & Medicaid Services (CMS). We help compare Medicare Advantage plans from the insurance companies we represent, and we don't offer every plan available in your area.