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Coverage Gap (Donut Hole)
A phase in Medicare Part D where you pay more for prescriptions until catastrophic coverage kicks in.
Full Definition
The coverage gap — informally called the 'donut hole' — is a temporary limit on what Medicare Part D will pay for drugs. After you and your plan together spend a set amount on covered drugs (the initial coverage limit), you enter the gap and pay higher cost-sharing until your out-of-pocket drug spending hits the catastrophic threshold. The Inflation Reduction Act of 2022 significantly reduced the donut hole; as of 2025 and continuing in 2026, there is a $2,000 annual out-of-pocket cap on Part D drug costs.
Real-World Example
You take several expensive brand-name medications. Once your Part D plan's initial coverage limit is reached, you enter the coverage gap and temporarily pay a higher percentage of your drug costs until your out-of-pocket spending hits the $2,000 cap.
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