Coverage Gap/Donut Hole

In years prior to 2025, Most Medicare drug plans have a coverage gap (also called the “donut hole”). This means there’s a temporary limit on what the drug plan will cover for drugs.

This not longer applies as of January 1, 2025, thanks to the Inflation Reduction Act (2022).

The coverage gap began after you and your drug plan have spent a certain amount for covered drugs ($5,030 in 2024, $4,660 in 2023, $4,430 in 2022, $4,130 in 2021, $4,020 for 2020, $3,820 for 2019, $3,750 for 2018). The period in which your prescription drug costs have exceeded the initial coverage limit of your plan.

Once you reached this donut hole period, you are responsible for covering the full cost of your drugs (discounted as below).

Prior to 2019, if you reached the coverage gap, you would have to pay 100% of your prescription drug costs in that period until you met the catastrophic coverage period spending threshold.

Thanks to the Affordable Care Act (2010), the coverage gap was shrinking and now, thanks to the Inflation Reduction Act (2022), the coverage gap/donut hole has been eliminated. Prior to 2025, the coverage gap did not close entirely but it shrank to where beneficiaries would pay no more than 25% out of their pocket in 2020/2021 and later for generic drugs instead of 44% as in 2018 or 37% in 2019. Beneficiary out of pocket costs for brand name drugs drops to 25% in 2019 and later (one year earlier than generic drugs) instead of 35% in 2018.

When the total cost of your prescription drugs reaches your yearly out-of-pocket spending limit ($8,000 in 2024, $7,400 in 2023, $7,050 in 2022, $6,550 in 2021, $6,350 in 2020, $5,100 in 2019, $5,000 in 2018), you will get out of the coverage gap.

* Brand-name prescription drugs *
Once you reach the coverage gap in 2019/2020/2021/2022/2023/2024, you’ll pay no more than 25% of the plan’s cost for covered brand-name prescription drugs. 95% of cost will apply to out-of-pocket spending limit because pharmaceutical companies are responsible for 70% of medication cost in the donut hole. You paid 35% in 2018, 85% of the cost applied to out-of-pocket spending limit because pharmaceutical companies were responsible for 15% of medication cost in the donut hole.

* Generic prescription drugs *
Once you reach the coverage gap in 2020/2021/2022/2023/2024, you’ll pay no more than 25% of the plan’s cost for covered generic prescription drugs. You paid 37% in 2019. You paid 44% in 2018.