Donut Hole (Coverage Gap)
A phase in Medicare Part D where patients historically paid a higher share of drug costs after exceeding initial coverage but before reaching catastrophic coverage.
How It Works
The donut hole was a controversial feature of the original Medicare Part D design. Patients paid 100% of their drug costs in this gap. The Affordable Care Act gradually closed the donut hole by 2020, requiring manufacturers to provide a 70% discount on brand-name drugs in the gap. The Inflation Reduction Act further restructured Part D cost-sharing, and starting in 2025, the $2,000 annual out-of-pocket cap effectively eliminates the financial impact of the donut hole for most patients.
Related Terms
- Medicare Part D — The prescription drug benefit within Medicare, covering outpatient medications for 50+ million Americans aged 65+ and those with disabilities.
- Out-of-Pocket Cost — The amount a patient pays directly for a prescription drug — including copays, coinsurance, and deductible payments.
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About This Definition
This definition is part of the DrugPrice Drug Pricing Glossary — 34 terms explaining how prescription drug pricing works in the United States. All definitions are written in plain language for patients, caregivers, journalists, and healthcare professionals.