How to Get Out of the Medicare Donut Hole

The Medicare Part D coverage gap, commonly called the donut hole, was officially eliminated in 2025 under provisions of the Inflation Reduction Act. If you are still worrying about falling into it, the landscape has changed dramatically: there is now a hard $2,000 annual cap on what you pay out of pocket for prescription drugs under Part D. That said, $2,000 is still a lot of money, and the way plans have restructured around this cap introduces new wrinkles worth understanding. The old question of “how do I get out of the donut hole” has evolved into “how do I keep my drug costs as low as possible under the new rules.”

What the Donut Hole Was and Why It No Longer Exists

For nearly two decades, Medicare Part D had a coverage gap built into its benefit structure. After you and your plan spent a combined amount on drugs (the initial coverage limit), you entered a phase where you bore a much larger share of costs yourself. This gap persisted until your out-of-pocket spending hit a catastrophic threshold, at which point coverage kicked back in at a high level. During the gap years, studies found that seniors cut back on medications, with usage of expensive brand-name drugs dropping by roughly 8 to 18 percent and even lower-cost generics declining by 3 to 5 percent once people entered the gap.

1PubMed Central. Digesting the doughnut hole

The Inflation Reduction Act of 2022 phased in changes that reshaped this structure. Starting in 2025, the coverage gap was eliminated entirely, and a firm $2,000 annual out-of-pocket cap replaced the old catastrophic threshold. The law also eliminated the coinsurance that beneficiaries previously owed even in the catastrophic phase.

2PubMed. Assessing the impact of the Inflation Reduction Act on Medicare prescription drug coverage 3PubMed. The Inflation Reduction Act and Out-of-Pocket Drug Costs for Medicare Beneficiaries With Cardiovascular Disease

So the donut hole, as a discrete problem you needed to escape, is gone. But the $2,000 cap does not mean your drugs are free once you hit it, and the way plans have adjusted their other cost-sharing features means plenty of people will still feel financial pressure long before reaching that ceiling.

The $2,000 Cap Is Real, but the Pain Can Be Frontloaded

One of the biggest practical problems with the new cap is timing. If you take expensive specialty medications, you can blow through the entire $2,000 in January. A single fill of a high-cost oral cancer drug or a biologic for autoimmune disease can eat the whole annual limit in one month. After that, you owe nothing more for the rest of the year, but coming up with $2,000 in a single month is a serious hardship for many people on fixed incomes.

This is where the Medicare Prescription Payment Plan comes in. The MPPP lets you spread your out-of-pocket costs across the remaining months of the year in roughly equal installments. If you are prescribed an expensive drug in January, instead of paying the full $2,000 up front, you could pay about $167 per month for the rest of the calendar year.

4PubMed. Reducing Medicare Part D Out-of-Pocket Costs for Specialty Oral Anticancer Drugs Under the Inflation Reduction Act: Highlighting the Benefits of Enrolling in the Medicare Prescription Payment Plan

Enrollment in the MPPP is voluntary, and you can sign up at any point during the year. There is no interest charged on the spread payments. If you know you take medications that will push you toward the cap, signing up early is one of the simplest things you can do to avoid a cash-flow crisis. The plan does not reduce what you owe in total; it just makes the timing manageable.

How Plans Have Shifted Costs Around the New Rules

Insurers did not simply absorb the new cap without adjusting elsewhere. Research tracking plan design changes after the IRA found some significant shifts. For Medicare Advantage plans with Part D coverage, mean deductibles dropped from $153 in 2019 to $66 in 2024, then jumped back up to $228 in 2025. The share of Medicare Advantage enrollees who had zero deductible fell from about 77 percent in 2024 to roughly 40 percent in 2025. Stand-alone Part D plans saw mean deductibles climb from $295 in 2019 to $490 in 2025.

5JAMA Internal Medicine. Changes in Medicare Part D Plan Designs After the Inflation Reduction Act

On the bright side, monthly premiums moved in the other direction. Stand-alone plan premiums fell from an average of $51 to $40 over the same period, and Medicare Advantage plan premiums dropped from $38 to $7.

5JAMA Internal Medicine. Changes in Medicare Part D Plan Designs After the Inflation Reduction Act

What this means for you: the $2,000 cap protects you from the worst-case scenario, but you may hit that cap faster than before because plans are charging higher deductibles and restructuring cost-sharing in the initial coverage phase. Choosing your plan carefully during open enrollment matters more now than it did a few years ago, because the variation in deductibles and copay tiers across plans has widened.

Switching to Generics and Therapeutic Alternatives

Even with the cap in place, every dollar you do not spend on drugs is a dollar you keep. The single most effective way to lower your total drug spending is to use generics whenever possible. This is not new advice, but the savings remain substantial. A study of Medicare beneficiaries with diabetes found that roughly half of those without low-income subsidies were eligible for either a generic or therapeutic substitution. Generic substitutions alone saved an average of about $127 per year for those beneficiaries, while therapeutic substitutions, where your doctor switches you to a different drug in the same class that happens to be cheaper, saved an average of about $389 per year.

6PubMed Central. Potential savings associated with drug substitution in Medicare Part D: the Translating Research into Action for Diabetes (TRIAD) study

These numbers may not sound life-changing individually, but they compound across multiple medications. If you take four or five drugs and can switch two of them to cheaper alternatives, you might shave several hundred dollars off your annual total. Under the old system, that could have meant the difference between entering the donut hole and staying in the initial coverage phase. Under the new system, it can mean the difference between hitting the $2,000 cap and staying well below it.

The conversation to have with your doctor or pharmacist is straightforward: for each brand-name drug you take, is there a generic version? If not, is there a therapeutically equivalent drug in the same class that is available as a generic? Many physicians are receptive to these switches, especially when the clinical evidence shows comparable effectiveness.

Preferred Pharmacies and Mail-Order Savings

Where you fill your prescriptions matters more than most people realize. Most Part D plans designate certain pharmacies as “preferred,” and using a non-preferred pharmacy can cost you meaningfully more. Research has shown that unsubsidized Part D beneficiaries faced an average difference of $129 per year in out-of-pocket spending between non-preferred and preferred pharmacies.

7PubMed Central. Pharmacy switching in response to preferred pharmacy networks in Medicare Part D

Mail-order pharmacies are another lever. For maintenance medications you take every month, getting a 90-day supply by mail typically costs you less per unit than filling 30-day supplies at a retail pharmacy. One study comparing costs found that when prescriptions were dispensed through mail service rather than community pharmacies, member costs dropped substantially, from about $2.5 million to $1.7 million across a large sample of prescriptions.

8PubMed. Comparison of costs of community and mail service pharmacy

The picture has some nuance, though. A later study found that when comparing 90-day supplies specifically, per-unit patient costs were actually slightly lower through mail order ($0.24 vs. $0.31 at retail), but total costs and third-party payer costs were modestly higher through mail.

9PubMed Central. A comparison of costs of Medicare Part D prescriptions dispensed at retail and mail order pharmacies

The practical takeaway: check whether your plan’s mail-order option gives you a lower copay for 90-day supplies of your maintenance medications. Many plans structure it so a 90-day mail-order fill costs you two copays instead of three, which is an automatic savings of one month’s copay every quarter. And make sure your regular pharmacy is in your plan’s preferred network. Switching pharmacies is free and takes about 15 minutes.

Low-Income Subsidies and Extra Help

If your income and assets fall below certain thresholds, you may qualify for Medicare’s Low-Income Subsidy program, also called Extra Help. This program dramatically reduces or eliminates premiums, deductibles, and copays for Part D drugs. Many people who qualify do not realize it, and the application process is not as complicated as it might seem.

The IRA expanded eligibility for full low-income subsidies in 2024, and research suggests this expansion is likely to meaningfully improve medication adherence, particularly among women and racial and ethnic minority groups who had been disproportionately affected by cost-related nonadherence.

10PubMed Central. Affordability and adherence gains for Medicare Part D low-income subsidy recipients when low-income subsidy benefits expanded in 2024

If you are anywhere close to the income limits, it is worth applying. The subsidy can reduce your drug costs to a few dollars per prescription, which makes the $2,000 cap essentially irrelevant because you would never come close to reaching it. Your local State Health Insurance Assistance Program (SHIP) can help you determine eligibility and fill out the paperwork at no cost.

Medication Therapy Management Programs

Part D plans are required to offer medication therapy management to beneficiaries who meet certain criteria, typically people taking multiple medications for chronic conditions. These programs pair you with a pharmacist who reviews all your medications, looks for redundancies, checks for interactions, and identifies opportunities to simplify or reduce your regimen.

A large study of nearly 700,000 Medicare beneficiaries found that those enrolled in MTM had lower total healthcare costs and higher rates of appropriate medication use compared to non-enrollees. MTM participants had lower medication costs and lower medical costs overall.

11PubMed Central. Cost-Effectiveness of Medication Therapy Management Program across Racial/Ethnic Groups among Medicare Beneficiaries

A more recent study of pharmacist-led medication therapy optimization in a Medicare population found even more striking results: total medical costs dropped by about 19 percent following the intervention, and the savings grew over time, reaching about 32 percent beyond nine months.

12Health Affairs Scholar. Cost and utilization outcomes of pharmacist-led medication therapy optimization in a Medicare ACO population

If your plan offers MTM and you have not engaged with it, you are leaving money on the table. The pharmacist review is free to you, and it frequently turns up at least one change that saves money or improves outcomes. Call your plan and ask whether you qualify.

What About Appeals and Tiering Exceptions?

You might have heard that you can appeal your plan’s decision to place a drug on an expensive tier, or request an exception to get a lower copay. In theory, this is true. In practice, the success rate is discouraging for certain drug categories. A study of second-level appeals for denied anticancer medication claims found that appeals seeking tiering exceptions failed about 90 percent of the time. Anticancer drugs are frequently placed on specialty tiers that specifically preclude tiering exceptions under plan rules.

13JAMA Network Open. Second-Level Appeals of Denied Anticancer Medication Claims in Medicare Part D

That does not mean you should never appeal. If your plan denies coverage for a drug entirely, or requires prior authorization you believe is unwarranted, an appeal can succeed. The key distinction is between a coverage denial (the plan refuses to cover the drug at all) and a tiering dispute (the plan covers it but puts it on an expensive tier). Coverage denials have better appeal prospects than tiering fights, especially for non-specialty medications. For high-cost specialty drugs, your energy is often better spent exploring patient assistance programs offered by manufacturers, which can sometimes cover copays or provide the drug at reduced cost.

Watch Out for TrOOP Accounting Surprises

Not every dollar you spend on prescriptions counts toward the $2,000 cap. Medicare uses a concept called “true out-of-pocket costs” to determine when you have hit the limit. Payments from certain sources, like manufacturer discount cards or some charitable assistance, may or may not count toward TrOOP depending on how they are structured. If you are relying on a manufacturer copay card to cover part of a drug’s cost, verify with your plan whether those payments are counted toward your annual cap.

There is also a subtler concern about how the IRA’s changes have shifted cost responsibility within the benefit structure. Research has flagged that while the $2,000 cap protects beneficiaries on the surface, changes to TrOOP calculations have moved more cost burden to plan design elements, which could increase cost-sharing in ways that are not immediately obvious to beneficiaries.

14JCO Oncology Practice. Affordability at risk: Inflation, aging, and the future of prescription drug access after IRA reforms

The practical advice here is to track your spending throughout the year. Your plan is required to send you an Explanation of Benefits after each prescription fill, and it shows your cumulative TrOOP spending. If the numbers do not add up the way you expect, call your plan and ask for a breakdown. Mistakes happen, and catching them early can prevent you from overpaying.

Understanding Your Plan’s Benefit Is Harder Than It Should Be

One of the persistent challenges with Part D is that many beneficiaries do not fully understand how their coverage works. Research on Medicare beneficiary comprehension has found significant gaps in knowledge, noting that older adults are more likely to have difficulty understanding managed care structures and the details of their benefits.

15PubMed Central. Development of a medicare beneficiary comprehension test: assessing medicare part d beneficiaries’ comprehension of their benefits

This is not a personal failing. Part D is genuinely confusing, with its tiers, formularies, preferred networks, coverage phases, and annual changes to plan designs. The elimination of the donut hole simplifies one piece of the puzzle, but the rest remains complex. If you find it overwhelming, two free resources are worth knowing about. First, the Medicare Plan Finder tool on Medicare.gov lets you enter your specific medications and compare plans side by side based on your actual drug list. Second, SHIP counselors in every state provide one-on-one help with plan selection and benefit questions at no charge. These counselors are trained specifically on Medicare and can catch things you would likely miss on your own, like a plan that puts one of your drugs on a non-preferred tier or requires step therapy before covering the medication your doctor prescribed.

Drug Manufacturer Assistance Programs

Most major pharmaceutical companies run patient assistance programs for their brand-name drugs. These programs vary widely. Some provide the drug free to qualifying patients; others offer copay cards that cover a portion of your cost-sharing. Eligibility criteria differ by manufacturer and drug, but income limits tend to be more generous than you might assume.

For drugs that cost thousands of dollars per month, manufacturer assistance can be the difference between affording treatment and abandoning it. Organizations like the Patient Access Network Foundation and the HealthWell Foundation operate as intermediaries, offering copay assistance funded by drug companies and charitable donors. If you take a high-cost brand-name or specialty drug and are struggling with costs even under the $2,000 cap, searching for assistance by drug name on these organizations’ websites is a practical first step. Your prescribing physician’s office may also have a financial counselor or social worker who can identify programs you qualify for.