If the average retail cost of your formulary medication(s) is over $420 each month, and your drug plan has a standard Initial Coverage Limit of $5,030, you will enter the Donut Hole sometime during 2024.


Reminder:  You enter the Donut Hole or Coverage Gap based on the retail value of your formulary drug purchases.

You will enter your Medicare Part D prescription drug plan's Donut Hole or Coverage Gap if the total retail value of your formulary prescription purchases exceeds your plan's Initial Coverage Limit -- and most 2024 Medicare Part D plans (PDPs and MAPDs) will use the standard Initial Coverage Limit of $5,030.  This means when the total retail cost of your drug purchases exceeds $5,030, you enter the 2024 Donut Hole (not what you pay for drugs, but the retail value of formulary drugs).

You can read more in our article: "Understanding the 2024 Medicare Part D Donut Hole".

Question:  If you are purchasing Medicare Part D drugs with a retail cost of over $420 per month, when will you enter the 2024 Donut Hole or Coverage Gap?

The chart below shows the average retail drug costs that would cause you to enter the Coverage Gap or Donut Hole for any given month.




And here is how some of these retail drug costs would look in a chart . . .

Example: You purchase only one formulary medication per month that has a $475 retail value and your plan provides coverage for the drug with a $47 copay - when will you enter the Donut Hole?

If you use just one formulary medication that has a retail cost of $475 and you pay only a $47 copay with your Medicare Part D plan (assuming a brand name, Tier 3 drug), your Medicare plan will pay the remaining $428 ($475 - $47), but the total retail cost of $475 counts toward meeting your $5,030 Initial Coverage Limit.

The $47 that you spend out-of-pocket for the formulary drug counts toward your total out-of-pocket annual drug spending limit (TrOOP) or the amount you spend before exiting the Donut Hole and entering your plan's Catastrophic Coverage phase.

So, if your average monthly retail drug costs are $475, you will enter the 2024 Donut Hole or Coverage Gap in November - and your Donut Hole coverage cost will increase to $119 per month (based on the 25% Donut Hole discount).  See our chart above to estimate when you enter the Donut Hole based on your retail drug costs.

Bottom line:  If the retail cost of your formulary medications averages over $420 each month -- and you are not eligible for Extra Help -- you will enter the Donut Hole sometime during 2024.

Question:  But isn't the 2024 Donut Hole now closed?

Not exactly.  Although we say that the Donut Hole "closed" in 2020 since you receive a 75% discount on all formulary drugs, you will still leave your Medicare Part D plan's Initial Coverage Phase once your retail drug costs exceed the Initial Coverage Limit.  And when you leave your Initial Coverage Phase, you will enter the Coverage Gap (Donut Hole) where the cost of your formulary medications can increase, decrease, or stay the same - depending on your Medicare drug plan, your cost-sharing, and the drug's retail price.  You can click on our FAQ "Did the Coverage Gap or Donut Hole just close up and go away?" to read more. 

However, as you can see in the following chart, the forth phase of coverage -- Catastrophic Coverage, will still exist in 2024, but plan members will not have any out-of-pocket costs for formulary drugs after reaching the plan's $8,000 total out-of-pocket threshold (TrOOP). The Inflation Reduction Act (IRA) of 2022 eliminates beneficiary cost-sharing in the Catastrophic Coverage phase.

Important Fact:  2024 is the last year that the Donut Hole will exist. 

In 2025 one of the provisions of the Inflation Reduction Act (IRA) of 2022 is the elimination of the Coverage Gap (Donut Hole).   Medicare Part D beneficiaries will stay in the Initial Coverage phase until they reach the maximum cap on out-of-pocket spending for Part D formulary drugs - RxMOOP - which is set at $2,000 for 2025.  After reaching RxMOOP Medicare Part D beneficiaries will have a $0 copay for all formulary drugs.


Question:  How does "Retail Drug Cost" Compare to "Your Actual out-of-pocket Drug Cost"

Retail drug costs are not what you actually spend out-of-pocket for your prescriptions.  Instead, retail cost is what you spend - plus what your Medicare Part D plan pays (or others pay on your behalf).  Using the example above, your plan's negotiated retail price is $475, but your actual out-of-pocket drug cost is a $47 copay.

Unfortunately, your Medicare plan's monthly Explanation of Benefits (EOB) letter does not state "Retail Drug Cost", but instead, your EOB will show two different columns with: "Plan Paid" and "You Paid" - when these two columns are added together, the sum is your Medicare drug plan's negotiated retail drug cost.


Review: "Lesser-of" rule used when your plan's cost-sharing is more than the drug's retail price

If the retail price of your formulary medication is less than your copayment, you will pay the retail price and not the higher copayment - based on the "lesser of" rule (you always pay the lesser of the retail cost or copay).

For example, if you are purchasing a Tier 3 generic medication with a $40 retail cost and the copay is $47, you will pay the $40 retail cost - and not the higher $47 copay.

Bottom line: You never pay more than your Medicare plan's negotiated retail drug price.


Question:  Where can you see retail drug price information?

Your Medicare plan should have an online tool that shows you the most current retail price information for your formulary drugs - you can call your plan for more information about retail drug prices.  The Medicare Plan Finder (MyMedicare.gov) also shows the plan's retail drug prices.  You can also telephone a Medicare representative (1-800-Medicare) for retail drug price information.

Both our Formulary Browser (showing all drugs for a single Medicare plan) and our Drug Finder (showing all Medicare plans covering a single drug) include CMS formulary data and average retail pricing information.

For more information, our Retail Drug Pricing Detail pages show the pricing history for each medication (when available).  As noted, our retail drug pricing information is the average price across all pharmacies in a specific region and actual retail drug costs can vary slightly at your specific pharmacy.
 

Entering the 2024 Donut Hole as compared to the 2023 Donut Hole

The good news:  If retail costs of your prescription have not changed since 2023 (which is unlikely), the 2024 Donut Hole or Coverage Gap should start just slightly later since the 2024 Initial Coverage Limit ($5,030) is slightly higher than the 2023 Initial Coverage Limit of $4,660.

In other words, you will be able to purchase slightly more prescriptions before entering the 2024 Donut Hole as compared to 2023.


Example of how entering the Donut Hole changes over the years.

If your average monthly retail medication costs were $400 in 2016, you entered the 2016 Donut Hole in early-September 2016.  However, if your costs remained the same the next year, you entered the 2017 Donut Hole sometime in early-October 2017.  Based on the same $400 average monthly retail drug cost, you entered the 2018 and 2019 Donut Holes in mid-October and you entered the 2020 Donut Hole early-November. In 2021, you entered the Donut Hole slightly later in early-November and in 2022 and 2023 you entered the Donut Hole in early- to mid-December. And in 2024, if your monthly costs are $400 per month, you will NOT enter the Donut Hole.

And in 2025, there will be no more Donut Hole!


More good news: No Donut Hole for Medicare beneficiaries with Extra Help

If you receive Medicare Part D Extra Help or Low-Income Subsidy (LIS), then you will never enter the 2024 Donut Hole and the cost of your prescriptions will remain constant until you reach the Catastrophic Coverage portion of your Medicare Part D plan coverage.

And if you are qualified for your state's Medicaid program, you are automatically qualified for Extra Help.


And more good news: Once any Medicare beneficiary enters the Catastrophic Coverage phase, they will have no cost-sharing for the remainder of the year.  Starting in 2024, the Catastrophic Coverage phase will still exist, but plan members will not have any out-of-pocket costs for formulary drugs after reaching the plan's $8,000 total out-of-pocket threshold (TrOOP), thanks to the Inflation Reduction Act (IRA) of 2022.

Review:  Entering the Donut Hole and the Donut Hole Discount

If you enter the Donut Hole, you will pay 25% of retail for all formulary drugs.

Using our earlier example, if you are using a brand-name drug with a retail cost of $375, and you enter the Donut Hole, you would receive the brand-name Donut Hole discount and pay 25% of retail or $94 (and so yes, even though considered "closed", coverage in the Donut Hole is costing you more than your $47 copay from your Initial Coverage phase).


Estimating your Medicare Part D plan spending with our Donut Hole Calculator

You can use our 2024 Donut Hole Calculator or PDP-Planner/2024 to get an idea of how you can budget for 2024 drug costs.

The following link shows an example for a person with retail brand-name drug costs totaling $800 per month: PDP-Planner.com/2024/ex1 (as noted below, you can adjust the example and drug mix to estimate your actual out-of-pocket costs).

Spoiler Alert: If your average retail drug cost are $800 per month, and you use only brand-name drugs, you enter the 2024 Donut Hole in June, and do not exit into Catastrophic Coverage.  Your out-of-pocket drug costs would be about $2,809 for the year.


You can change the $800 value in our example to your own prescription spending - change the deductible - and choose your mix of generic or brand-name drugs) to see a preview of your own 2024 Medicare Part D drug coverage.

Still not sure what all these numbers mean to you?  Click here and let us know.