If you’re turning 65 or becoming Medicare eligible one of your challenges is choosing a drug plan. Many are confused by the term “Donut Hole” (also called the Coverage Gap). Effective January 1st, 2025, there will be no Coverage Gap or Donut Hole. Medicare Prescription Drug Plans will have 3 parts or phases, Initial Deductible, Initial Coverage and Maximum Out of Pocket.

1. The drug plan you choose for 2025 might have no deductible or a deductible as high as $590. Many drug plans have no deductible on the inexpensive generic drugs, but have deductibles on the more expensive brand drugs. This is one way the insurance companies that market these plans control their costs and encourage their members to use generic drugs whenever possible.
2. After the initial deductible (if there is one) is met you enter the Initial Coverage Phase. During this period you only pay a copay or a percentage of your prescription drugs. If you purchase a drug with a retail value of $100, but pay $30, the entire $100 counts toward your Maximum Out of Pocket. 
3. Although in 2024 the Medicare Maximum out Pocket was $8,000, it will only be $2,000 in 2025. This a major milestone that will dramatically reduce prescription drug costs for seniors.