Coverage Gap

by David Bynon, last updated

What is the Medicare Part D Coverage Gap?

The Medicare Part D coverage gap, also known as the donut hole, is one of the four phases of a Medicare Part D plan. The other phases of Part D coverage include:

  • Deductible period:  Plan members are responsible for the full price of their prescription drugs until retail spending reaches the Part D plan’s annual deductible.
  • Initial coverage period (ICL): Once the deductible is met, the plan will cover a portion of the cost and the member will be responsible for a copayment or coinsurance. This continues until retail spending reaches the annual ICL.
  • Coverage gap: This is the third phase of coverage.
  • Catastrophic coverage: All Part D plans provide catastrophic coverage when a member’s out-of-pocket costs reach the annual catastrophic spending limit.  This sum includes what a member pays for covered medications. In this phase, a member pays significantly lower copays and coinsurance. 

In the Part D coverage gap phase, a plan member pays higher cost-sharing for their prescription drugs. This continues until their spending reaches the level needed for catastrophic coverage. The coverage gap starts when a member and the plan have paid a set dollar amount for prescription drugs during that year.


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