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Does Medicare Part D still have a donut hole?

No, the infamous donut hole — when Medicare beneficiaries with Part D prescription drug coverage had to pay 100 percent of their drug costs until they reached a certain threshold — has closed. The Affordable Care Act enacted in March 2010 gradually reduced the share of the costs people had to pay in the donut hole starting in 2011. Discounts from drug manufacturers and government payments helped to cover more costs over several years. The donut hole finally closed for good in 2020, having phased out in 2019 for brand-name drugs and in 2020 for generic drugs.

That doesn’t mean your prescriptions are totally covered. After you and your Medicare Part D prescription drug plan have spent a certain amount for your medications each year, you still must pay up to 25 percent of the cost for covered drugs. That’s called the coverage gap.

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When do I reach the Part D coverage gap?

In 2024, you’ll hit the coverage gap when you and your insurance company have paid $5,030 for your medications during a year. That number includes any deductible you must pay before a plan will cover your prescriptions. In 2024, Part D plans can have a deductible of up to $545 although many plans don’t have a deductible.

You’ll stay in the gap until you’ve spent $8,000 out of your own pocket for covered drugs during the year. Then you’ll automatically enter the catastrophic coverage phase. Starting in 2024, you no longer have to pay out-of-pocket costs for covered drugs for the rest of the calendar year after you reach the catastrophic phase.

You may not reach all the coverage phases during a year, depending on the cost of your medications. And you get to start over again when a new plan year begins each Jan. 1.

How do I get out of the Part D coverage gap?

When your out-of-pocket spending hits $8,000 in 2024 — the amount you personally have paid, not the insurer’s share — you move from the coverage gap to the catastrophic coverage phase and your out-of-pocket costs stop.

Expenses you’ll pay that count toward the coverage gap include:

  • Your deductible.
  • Copayments and coinsurance you paid for your medications during the initial coverage phase.
  • Money you spent in the coverage gap.

A manufacturer’s discount on brand-name drugs in the coverage gap also counts. Drug manufacturers pay 70 percent of the insurer’s negotiated cost of brand-name drugs to discount what you pay in the coverage gap.

For generic drugs, Medicare pays 75 percent of the cost while you’re in the coverage gap; only the 25 percent you pay counts toward getting you out of the coverage gap.

Monthly Part D premiums, any portion of the costs your drug plan pays and what you pay for drugs not covered won’t count to help you exit the coverage gap.


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How do I know which Part D phase I’m in?

Your Part D plan keeps track of how much you’ve spent for covered drugs and where you are in your coverage. The plan must send you a monthly statement, called an explanation of benefits, every month you fill a prescription. You may also be able to access this statement online.

When choosing a Part D plan, the Medicare Plan Finder can show you when you’re likely to enter and leave the coverage gap based on the costs each plan in your area charges for your medications. It also estimates your out-of-pocket costs by month and shows how much you would pay in each of the coverage phases for each plan.

These coverage phases will change on Jan. 1, 2025, when there will be an annual $2,000 cap on out-of-pocket expenses for people who get drug coverage through a stand-alone Part D plan or a Medicare Advantage plan.

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Keep in mind

If you qualify for the Part D Extra Help financial assistance program, you won’t have a coverage gap. People with income and assets below a certain level can qualify for Extra Help to pay Part D premiums, deductibles, copayments and coinsurance.

With full Extra Help, you’ll pay no more than $4.50 for each covered generic drug and $11.20 for each brand-name drug in 2024 until you reach the catastrophic coverage level and your copayments stop.

More people are eligible for full Extra Help starting in 2024, when the Inflation Reduction Act increases the income limits to qualify.

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