Medicare Donut Hole: What Was It?
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Starting in 2025, Medicare no longer has a ‘donut hole,’ or coverage gap.
In prior years, you paid up to 25% out of pocket for covered medications in the donut hole phase.
Starting in 2025, once you reach the annual out-of-pocket cap ($2,000 in 2025), you’re done paying out of pocket for the year.
Medicare Part D prescription drug coverage is organized into multiple phases or stages. Through 2024, there were four phases. The ‘donut hole’ coverage gap was the third of these four phases. Starting in 2025, there are only three phases, and there’s no more donut hole.
» Read about more Medicare changes: What’s new for Medicare in 2025?
What are the phases of Medicare Part D in 2025?
There are three phases of Medicare Part D coverage in 2025. First is the deductible phase. Second is the initial coverage phase. Third is the catastrophic coverage phase. (The donut hole used to be the third stage, but it’s gone as of 2025.)
Here’s how the 2025 Medicare Part D phases work:
Phase 1: Deductible
In the deductible phase, you pay for your drugs out of pocket until you meet your plan’s annual deductible, if it has one. The maximum deductible is $590 in 2025. Once you’ve met your plan’s deductible, you move on to the initial coverage phase.
Phase 2: Initial coverage
In the initial coverage phase, your Part D plan starts to pay for some or all of the cost of your covered drugs. You pay copays and/or coinsurance according to your plan’s formulary until you reach the annual out-of-pocket cap: $2,000 in 2025.
Phase 3: Catastrophic coverage
Once you’ve reached the annual out-of-pocket cap, you’re done paying copays and/or coinsurance for covered Medicare Part D drugs for the year (but you do keep paying monthly premiums). Behind the scenes, Part D plans, drug manufacturers and the government pay for covered drugs.
You might see these divisions of Medicare Part D coverage described as “phases” or “stages” in documents from Medicare or your insurance company.
Medicare will have big changes in 2025. Compare Medicare Part D Plans
What was the ‘donut hole’ in Medicare?
The donut hole was the third of four phases of Medicare Part D coverage. It came after the deductible and initial coverage phases, but before catastrophic coverage. In the donut hole, you paid up to 25% of the cost of covered drugs out of pocket.
2024 was the last year of the donut hole. In 2024, you would enter the donut hole once you and your Part D plan together spent $5,030 on covered drugs. You’d leave the donut hole when your out-of-pocket costs for covered drugs reached $8,000.
As of 2025, there’s no donut hole. So when you reach the new annual out-of-pocket cap — $2,000 in 2025 — you go straight to catastrophic coverage and stop incurring additional out-of-pocket costs.
The parts of Medicare
Read more about the different parts of Medicare and what they cover.
