. You will enter the Donut Hole or Coverage Gap portion of your Medicare Part D
plan when the total "retail cost" of your medication purchases exceeds your plan’s
Initial Coverage Limit
(ICL). This "retail cost" figure is a combination of what you pay for your medications plus the portion paid by your Medicare Part D plan*
For example, if you buy a medication at your local pharmacy that has a retail cost of $100, you will pay your plan’s co-payment or cost-sharing, maybe $30, and your plan will pay $70 or the balance of the $100 retail cost. From this example purchase, the total retail cost of $100 is counted toward meeting your plan’s Initial Coverage Limit. In 2023
, the standard Medicare Part D Initial Coverage Limit is $4,660 ($5,030 in 2024
) - and so after your purchase the $4,660 ICL would be reduced by $100.
Naturally, if your Medicare Part D plan has an initial deductible, all formulary drugs that you purchase during the deductible - where you are paying the full retail drug cost - will count toward your plan's ICL. For example, if you purchase a formulary drug for the full retail cost of $100, the $100 you spend counts toward meeting your deductible and toward meeting your ICL and entering the Coverage Gap.
In short, once you have purchased medications with a retail value over your Medicare Part D plan's ICL, you enter your Medicare Part D plan’s Donut Hole.
Please remember that your Medicare Part D plan’s Initial Coverage Limit can change every year (usually increasing). You can click here
to see how the Initial Coverage Limit has changed since 2006.
In some infrequent situations, the amount paid by another party toward your drug coverage may also count toward reaching the Donut Hole or Coverage Gap. For example, in 2023, the Inflation Reduction Act
(IRA) was implemented and provides that a Part D plan can charge no more than a $35 copay for a 30-day supply of covered insulin. But since the IRA was passed so late in 2022, most 2023 Medicare drug plans had already submitted finalized plan designs and were not prepared for a $35 (or less) insulin during the plans initial deductible. So in 2023, the federal government covered a portion of the cost for insulin
in the deductible and the full retail cost of insulin counted toward meeting the plan's deductible and reaching the Coverage Gap. In this situation, what the government paid in 2023, and what the person paid, counted together toward meeting the ICL.