No More Donut Hole

Big changes are coming to Medicare Part D this year, and they are great news for seniors and those relying on prescription drug coverage. One of the most significant updates is the elimination of the dreaded "donut hole" coverage gap and the introduction of a $2,000 cap on out-of-pocket spending for covered prescription drugs.

This change will make medication costs more predictable and manageable for Medicare beneficiaries. Additionally, Medicare Part D plans will now offer enrollees the option to spread out drug costs in monthly installments, making high-cost prescriptions more manageable on a monthly basis. Here’s what you need to know about these updates, how they will work, and what to look for with different plans.

The "Donut Hole" Coverage Gap Is Gone

In the past, Medicare Part D enrollees would enter a coverage gap after reaching a certain spending threshold. This gap, commonly called the “donut hole,” meant that beneficiaries had to pay a larger percentage of their prescription drug costs before reaching the catastrophic coverage phase.

Starting in 2025, the donut hole will be eliminated. Instead, beneficiaries will have a clear and defined spending limit on out-of-pocket costs.

A $2,000 Out-of-Pocket Spending Cap on Covered Drugs

One of the biggest improvements to Medicare Part D is the introduction of a $2,000 cap on out-of-pocket drug expenses for all enrollees.

  • Once a patient reaches $2,000 in total out-of-pocket costs, they won’t have to pay anything more for covered prescription drugs for the rest of the year.
  • Previously, patients in the catastrophic coverage phase still had to cover 5% of drug costs indefinitely, which could add up to thousands of dollars—especially for high-cost medications.
  • This new cap eliminates unlimited spending and provides much-needed financial relief for many Medicare beneficiaries.

Monthly Payment Option for Prescription Drug Costs

Many Medicare beneficiaries struggle with paying high prescription drug costs all at once. To make medications more affordable, Part D plans will now be required to offer an option that allows enrollees to spread their drug costs over 12 months.

By opting into a monthly installment program, beneficiaries will find it easier to budget. This especially helps those on fixed incomes. There are variations in plans so be sure to review the details of your specific plan.

If you sign up for this plan, you will not pay at the pharmacy. You will receive a monthly bill which will reflect your drug costs spread over the year. If your medications change, this monthly bill will accurately reflect that change.

What to Watch Out for in Different Plans

While these changes will be beneficial for most Medicare Part D enrollees, there may still be variations in how different insurance companies implement these updates. Some important factors to consider:

  • Deductibles: Some Part D plans may still require beneficiaries to meet an annual deductible before coverage kicks in. Understand what this may be for your plan.
  • Co-Pays & Tiered Pricing: While the $2,000 cap is a huge relief, individual medications may still have different co-pays depending on whether they are generic, preferred brand-name, or specialty drugs. Your pharmacist can help you to understand the options and benefits.
  • Plan Networks & Covered Drugs: Each Part D plan has a formulary (list of covered drugs). It's important to check whether your medications are covered and if there are any restrictions, such as prior authorizations or step therapy requirements.

Who Benefits Most from These Changes?

These changes will benefit many people including:

  • Seniors with high drug costs. These patients on expensive medications will now have a safety net against overwhelming costs.
  • Individuals on specialty medications. Patients who take biologics, cancer treatments, or insulin will see a big savings.
  • Fixed-income patients. The option to spread payments over 12 months can ease financial stress.

If you have a Medicare Part D plan, work with your doctor and pharmacist to select the best medications to manage your health while being mindful of your cost. Many times there are lower-cost alternatives to help you manage your budget.

The Healthstar Physicians network offers primary care and specialty services across East Tennessee. Our medical team is part of your community and because of that we are Near You, For You.