Jane Dotson
The donut hole is a colloquial term for a gap in prescription drug coverage in Medicare Part D. It refers to a period of time each year during which coverage for prescription drugs is not covered by Medicare Part D. This means that after an individual and their drug plan have spent a certain amount of money for covered drugs, they have to pay all costs out-of-pocket for their prescriptions up to a yearly limit. In 2025, the donut hole was closed and replaced with a cost cap, meaning that when a person reaches an out-of-pocket expense of $2,000, they will no longer have to pay anything for their prescription drugs for the rest of the year.
| Characteristics | Values |
|---|---|
| Term Origin | The term "donut hole" was coined during the creation of Medicare Part D in 2003. |
| Definition | A colloquial term for a gap in prescription drug coverage in Medicare Part D. |
| Applicability | Applicable to patients with Medicare prescription drug coverage (Part D). |
| Entry Condition | Entry into the "donut hole" occurs after surpassing the initial coverage limit of the patient's Part D plan. |
| Inside the "Donut Hole" | Patients pay a higher percentage of prescription costs, typically 25%, until they reach the out-of-pocket (OOP) threshold. |
| Exit Condition | Patients exit the "donut hole" when their out-of-pocket expenses reach a specified limit, such as $7,400 or $8,000. |
| Impact | Some patients experienced increased medication costs, while others paid less. Many stopped taking their medications due to affordability concerns. |
| Status as of 2025 | The "donut hole" has been closed and replaced with a cost cap. Patients no longer pay out-of-pocket expenses for prescription drugs after reaching a spending limit of $2,000. |
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What You'll Learn
- The 'donut hole' is a colloquial term for a gap in prescription drug coverage
- It refers to a period of time each year when prescription drugs are not covered by Medicare Part D
- Before the donut hole, you pay a standard copay (usually $20 or less)
- After entering the donut hole, you pay 25% of the cost of prescription drugs
- The donut hole was closed in 2025, replaced with a cost cap of $2,000
The 'donut hole' is a colloquial term for a gap in prescription drug coverage
The "donut hole" is a colloquial term for a gap in prescription drug coverage for people with Medicare Part D. It refers to the period of time each year during which coverage for prescription drugs is not covered by Medicare Part D. This means that after an individual and their drug plan have spent a certain amount of money for covered drugs, they have to pay all costs out of pocket for their prescriptions up to a yearly limit.
The donut hole was created when Medicare Part D was established in 2003. It was a compromise between two camps: those who wanted coverage to start at zero dollars and those who wanted it to have catastrophic coverage. The donut hole design was intended to encourage seniors to use generic medication over more expensive name-brand drugs.
Before entering the donut hole, an individual has an initial coverage limit, which includes the total (retail) cost of drugs—what both they and their plan paid for their prescriptions. Once this limit is surpassed, they enter the donut hole and have to pay a certain percentage of the cost of their prescriptions themselves until they reach the out-of-pocket (OOP) threshold, or the yearly limit. At this point, their plan may help pay for their prescriptions again.
The donut hole has been criticised for causing many people in the United States to stop taking their medications due to the high costs of drugs. As a result, the Affordable Care Act (ACA) has been closing the donut hole since its passing in 2010, and as of 2025, Medicare has closed the donut hole and replaced it with a cost cap. This new cap means that when an individual reaches an out-of-pocket expense of $2,000, they will no longer have to pay anything for their prescription drugs for the rest of the year.
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It refers to a period of time each year when prescription drugs are not covered by Medicare Part D
The "donut hole" is a colloquial term for a gap in prescription drug coverage in Medicare Part D. This means that there is a period of time each year when prescription drugs are not covered by Medicare Part D.
Medicare Part D is an optional federal government program that helps Medicare beneficiaries pay for self-administered prescription drugs. It was enacted as part of the Medicare Modernization Act of 2003 and went into effect on January 1, 2006. Part D plans are provided by private insurance companies that receive premiums from both enrollees and the government. The plans typically pay most of the cost for prescriptions, but enrollees cover a portion of their drug expenses through cost-sharing.
The "donut hole" refers to the way a person needed to pay for coverage. A person paid a specified amount for their prescription drugs, and once they met this deductible, their plan took over the funding. However, when the plan had paid up to a specified limit, the person had reached the "donut hole". Once they reached this point, a person had to start paying for their medications again until they reached another specified amount. After this, their plan took over payment once again.
The issue with the "donut hole" was that many people in the United States stopped taking their medications upon reaching this gap because they could not afford the high costs of the drugs. As of 2025, the "donut hole" has been closed and replaced with an out-of-pocket spending cap. This means that when a person reaches a spending limit of $2,000, they enter "catastrophic coverage" and no longer have to pay anything for their prescriptions for the rest of the year.
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Before the donut hole, you pay a standard copay (usually $20 or less)
The "donut hole" is a colloquial term for a gap in prescription drug coverage in Medicare Part D. This term describes the period of time each year during which coverage for prescription drugs is not covered by Medicare Part D. Before the donut hole, you pay a standard copay, which is usually $20 or less. This copayment is a fixed dollar amount that a person with insurance pays when receiving certain treatments, which, in the case of Medicare, usually applies to prescription drugs.
The donut hole was created when Medicare Part D was established in 2003. This optional insurance may be purchased by people receiving Medicare. Before 2006, Medicare did not include insurance for prescription drugs. As the costs of drugs skyrocketed, Medicare Part D was created. However, there were differing opinions on how this insurance should be structured. Some wanted it to start coverage at zero dollars, while others wanted it to have catastrophic coverage. As a result, a compromise was made, and the donut hole design was implemented.
In the donut hole, you pay a greater percentage of the cost of prescriptions, usually 25% of the true cost, which can vary depending on the medicine. This can be very problematic for many people in the United States, causing them to stop taking their medications due to the high costs. Once an individual crosses the donut hole, they reach "catastrophic coverage," where they only pay about 5% of the cost of the prescription drugs.
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After entering the donut hole, you pay 25% of the cost of prescription drugs
The "donut hole" is a colloquial term for a gap in prescription drug coverage in Medicare Part D. It refers to the way a person needed to pay for coverage. After an individual and their drug plan have spent a certain amount of money for covered drugs, they have to pay all costs out of their own pocket for their prescriptions up to a yearly limit. This is the "donut hole".
Before entering the "donut hole", an individual pays a standard copay, which is usually $20 or less. After entering the "donut hole", they pay 25% of the true cost of prescription drugs. This varies a lot depending on the medicine and can be as low as the copay or much higher. For example, in 2024, individuals paid no more than 25% of the price for brand-name drugs. Their plan paid 75%, while they paid 25%.
After exiting the "donut hole", an individual enters the "catastrophic coverage" stage, where they pay only about 5% of the cost of the prescription drugs. This is the final stage, where an individual no longer has to pay anything for their prescription drugs for the rest of the year. In 2024, the "catastrophic coverage" threshold was $8,000.
As of 2025, the "donut hole" has been closed and replaced with a new out-of-pocket spending cap of $2,000. This means that when an individual reaches this spending limit, they enter "catastrophic coverage" and no longer have to pay anything for their prescriptions for the rest of the year.
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The donut hole was closed in 2025, replaced with a cost cap of $2,000
The "donut hole" is a colloquial term for a gap in prescription drug coverage in Medicare Part D. This means that after an individual and their drug plan have spent a certain amount of money for covered drugs, they have to pay all costs out-of-pocket for their prescriptions up to a yearly limit. This is also known as "catastrophic coverage", where the individual only needs to pay about 5% of the cost of the prescription drugs. However, for many people in the U.S., getting to the stage of catastrophic coverage was problematic or impossible.
The donut hole was closed on January 1, 2025, and replaced with a cost cap of $2,000. This means that when an individual reaches an out-of-pocket expense of $2,000, they will no longer have to pay anything for their prescription drugs for the rest of the year. This new cap helps to give some Part D beneficiaries lower out-of-pocket costs, which may help to encourage them to continue taking their medications.
The closing of the donut hole helped to make way for three new Part D stages. Many Part D plans will have a deductible, which is an amount that an individual has to meet each year before Medicare will begin paying for their prescription drugs. Each Part D plan may have different deductibles, as they are provided by private insurance companies. However, in 2025, no plan can have a deductible that exceeds $590.
Another change to Part D plans in 2025 is the introduction of the prescription payment plan. This plan helps individuals manage their out-of-pocket expenses, although it does not lower drug costs or save them money. The prescription payment plan is a payment option that allows an individual to spread the cost of their prescription drugs out over the course of the calendar year (January to December).
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Frequently asked questions
Colloquially, the "donut hole" refers to a gap in prescription drug coverage in Medicare Part D.
Before entering the "donut hole", you would pay a standard copay (usually $20 or less). Once in the "donut hole", you would pay 25% of the cost of your prescription drugs. After passing the "donut hole", you would pay 5% of the cost.
When Medicare Part D was created in 2003, there was a disagreement over whether coverage should start at $0 or begin at catastrophic coverage. The "donut hole" was a compromise between these two positions.
People could avoid the "donut hole" by spending less than a certain amount on prescription drugs per year. For example, in 2023, the threshold was $4,660.
No, the "donut hole" was closed in 2025. It was replaced with a new out-of-pocket spending cap of $2,000, after which Medicare beneficiaries no longer have to pay anything for their prescription drugs for the rest of the year.
