Medicare’s No More Donut Hole

Great News! In 2025, the Part D Donut hole is eliminated. Now, once your out-of-pocket prescription drug costs reach over $2,000, you then enter a catastrophic coverage phase—and pay nothing for covered medications for the remainder of the year.

The Inflation Reduction Act (IRA) introduced significant changes to Medicare Part D in 2025, focusing on reducing out-of-pocket expenses and simplifying coverage. Key updates include:

  • Reduced out-of-pocket costs
    The annual limit for out-of-pocket prescription drug expenses is set at $2,000, covering deductibles, copayments, and coinsurance.

  • Capped monthly payments
    Beneficiaries now have the option to pay their out-of-pocket costs in monthly installments rather than in a lump sum.

  • Eliminated coverage gap
    The "donut hole," which previously required enrollees to pay 100% of their drug costs, has been removed.

  • Manufacturer Discount Program
    This new program replaces the previous Coverage Gap Discount Program.

  • Extra Help Program
    Low-income individuals may qualify for additional financial assistance. In 2025, individuals with a monthly income of up to $1,976 ($2,664 for couples) may be eligible.

  • No-cost recommended vaccines
    Medicare Part D beneficiaries can receive recommended vaccines at no charge.

The Medicare Prescription Payment Plan is a new program that enables Medicare Part D enrollees to pay their out-of-pocket prescription drug costs through monthly installments. The program became effective on January 1, 2025.

How It Works:

  • The plan integrates with your existing drug coverage.

  • You can enroll through either traditional Medicare or a Medicare Advantage Part D plan.

  • Your plan will pay the pharmacy directly, and you will receive a monthly bill.

  • Note that the plan does not reduce your overall drug costs or provide savings.

Who Is Eligible?

  • Anyone with a Medicare drug plan or a Medicare health plan that includes drug coverage can use the plan.

How to Enroll:

  • To opt in, simply contact your plan.

  • For more information, visit Medicare.gov or refer to your “Medicare & You” handbook.

Why It’s Useful:

  • The plan helps you manage out-of-pocket costs by spreading them out.

  • It can also prevent the surprise of having to pay a large drug cost upfront.

For further details on Medicare Part D, visit the Centers for Medicare & Medicaid Services (CMS) website.