If you’re stuck in the Medicare Part D donut hole, the most important thing to know is that the coverage gap has been eliminated starting in 2025. Under the Inflation Reduction Act, Part D enrollees now have a hard cap of $2,000 per year on out-of-pocket drug costs, and the donut hole phase no longer exists as a separate stage of coverage. If you’re currently dealing with coverage gap costs from a 2024 plan year, there are still practical strategies to reduce what you pay right now.
What the Donut Hole Actually Was
The donut hole was a phase of Medicare Part D coverage where your cost-sharing jumped significantly. After you and your plan spent a combined amount on drugs during the year, you entered this gap. In recent years, you were responsible for 25% of the cost of both brand-name and generic drugs during this phase. For people taking expensive medications, that 25% could still mean hundreds or thousands of dollars out of pocket before you reached the next phase of coverage, called catastrophic coverage.
The original Part D design was even worse. When the program launched in 2006, enrollees in the donut hole paid 100% of their drug costs. The Affordable Care Act gradually closed that gap to 25%, but the coverage hole remained a financial burden for millions of Medicare beneficiaries every year.
The 2025 Changes That Eliminated the Gap
Starting in 2025, the coverage gap phase is gone entirely. Part D enrollees no longer face a change in their cost-sharing when they move past the initial coverage phase. Your copays or coinsurance for a given drug stay consistent regardless of how much total spending has accumulated during the year.
More importantly, your total out-of-pocket drug spending is now capped at $2,000 per year. Once you hit that threshold, you pay nothing more for covered prescriptions for the rest of the year. This cap will rise slightly each year, indexed to the growth rate of per capita Part D costs, but it replaces what was previously an unpredictable and often steep financial cliff for people on multiple medications.
Plans are also required to offer a payment smoothing option, letting you spread your out-of-pocket costs across the year in monthly installments rather than paying large sums upfront when you fill expensive prescriptions early in the year.
If You’re Still on a 2024 Plan Year
For anyone whose 2024 coverage year hasn’t fully wrapped up or who is dealing with leftover costs, the old structure still applies. Under the 2024 rules, you entered the donut hole after total drug spending (your share plus your plan’s share) reached a set threshold, and you paid 25% of drug costs until your out-of-pocket spending hit the catastrophic coverage limit. At that point, your costs dropped sharply.
The fastest way through the donut hole under the old structure was simply to keep filling your prescriptions. Every dollar you spent on covered drugs counted toward the out-of-pocket threshold that triggered catastrophic coverage, where your costs dropped to a small copay or coinsurance. Skipping medications to save money could actually prolong the time you spent in the gap and put your health at risk.
Strategies to Lower Drug Costs at Any Stage
Even with the $2,000 cap now in place, reaching that threshold can still be a significant expense on a fixed income. Several approaches can reduce what you spend.
Switching to generic or biosimilar versions of your medications is one of the most effective moves. Generics can cost a fraction of brand-name drugs, meaning you accumulate out-of-pocket spending more slowly. Ask your prescriber whether therapeutic alternatives exist for any brand-name drugs you’re currently taking. Sometimes a different medication in the same class is available as a generic and works just as well for your condition.
Comparing Part D plans during open enrollment (October 15 through December 7 each year) can also make a real difference. Plans vary widely in which drugs they cover, what tier they place them on, and what pharmacies offer preferred pricing. A drug that costs you $50 a month on one plan might cost $15 on another. Medicare’s Plan Finder tool at medicare.gov lets you enter your specific medications and compare total estimated costs across available plans in your area.
Many drug manufacturers offer patient assistance programs that provide medications at reduced cost or free. These programs are typically available through the manufacturer’s website or through databases like NeedyMeds or RxAssist.
Extra Help for Lower-Income Enrollees
Medicare’s Extra Help program (also called the Low-Income Subsidy) can dramatically reduce or eliminate your Part D costs, including premiums, deductibles, and copays. To qualify, your annual income must be limited to $23,475 for an individual or $31,725 for a married couple living together. Your countable assets (savings, investments, real property other than your home) must be below $18,090 for an individual or $36,100 for a couple.
If you qualify, Extra Help pays a significant portion of your drug costs. Even partial Extra Help can save you thousands of dollars a year. You can apply through the Social Security Administration’s website, by calling Social Security, or at your local Social Security office. Many people who qualify never apply because they don’t realize the program exists or assume their income is too high.
State Pharmaceutical Assistance Programs
A number of states run their own pharmaceutical assistance programs that help residents pay for Medicare Part D premiums, copays, or both. These State Pharmaceutical Assistance Programs (SPAPs) vary significantly in eligibility requirements and what they cover. Some states have generous income limits that extend well above the federal Extra Help thresholds.
To find out whether your state offers an SPAP, contact your State Health Insurance Assistance Program (SHIP), which provides free counseling to Medicare beneficiaries. SHIP counselors can also help you compare Part D plans, apply for Extra Help, and identify any other programs you might qualify for. You can find your local SHIP by calling 1-877-839-2675 or searching at shiphelp.org.