For example, a person will exit the 2024 Donut Hole if their medication purchases average a total retail cost of over $1,038 per month. They will then enter the Catastrophic Coverage phase - the higher your average monthly retail drug costs, the faster you will enter Catastrophic Coverage.
But, since your Medicare Part D plan changes every year, your spending and timing of when (or if) you enter Catastrophic Coverage can also change -- keep in mind that 2023 was the last year that Medicare Part D beneficiaries paid cost-sharing in the Catastrophic Coverage phase. For plan year 2024 and beyond, the Inflation Reduction Act (IRA) eliminated beneficiary cost-sharing in the Catastrophic Coverage phase.
Again, in the 2024 Catastrophic Coverage phase and beyond, you will pay nothing for your formulary drug purchases through the end of the year.
Prior to 2024, you paid the greater of either 5% of the formulary drug's retail price or a fixed copay (that was set annually) depending on the type of drug -- generics and preferred brand drugs that are multi-source drugs or all other brand-name drugs. So, in this example, for a $6,000 drug, you would pay 5% of $6,000 or $300 per prescription for the remainder of the year. Reminder: Usually, we estimate when you enter Catastrophic Coverage based on your total out-of-pocket spending (TrOOP), but in this FAQ, we are estimating your retail drug purchases necessary to just meet your TrOOP.
In other words, after you spend over $8,000 out-of-pocket in 2024, you will meet your Medicare Part D prescription drug plan's out-of-pocket spending limit (TrOOP), exit the Coverage Gap or Donut Hole phase of your Medicare drug plan coverage, and enter the Catastrophic Coverage phase - and based on annual Part D plan parameters and past purchases of generic and brand drugs, we can estimate the retail drug costs necessary to meet your annual TrOOP.
Important Update: After 2024, the Donut Hole will no longer be a part of your Medicare Part D coverage.
Starting in 2025, the Inflation Reduction Act (IRA) eliminates the Coverage Gap (Donut Hole). In 2025 and beyond, Medicare Part D beneficiaries will stay in the Initial Coverage phase until their out-of-pocket spending for Part D formulary drugs (TrOOP) reaches the maximum out-of-pocket spending limit for Part D formulary drugs (RxMOOP) - which is set at $2,000 for 2025. After reaching RxMOOP, Medicare Part D beneficiaries will enter Catastrophic Coverage and have a $0 copay (no additional costs) for all formulary Medicare Part D drugs through the remainder of the year.
Medicare Part D coverage 2025 and beyond
