Medicare Part D Donut Hole: What You Need to Know in 2026

Prescription costs can feel unpredictable. Especially when a familiar Medicare term appears on an older explanation of benefits: the “donut hole.” If you are helping yourself or a family member plan for 2026. It is important to know that the rules have changed.

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To see why this change matters, it helps to first understand how the former coverage gap worked and why it caused so much confusion for beneficiaries.

What Was the Medicare Part D Donut Hole?

The Medicare Part D donut hole was a temporary coverage gap in the prescription drug benefit. It occurred after a beneficiary passed the plan’s initial coverage limit but before reaching catastrophic coverage. During this gap, the plan paid less toward covered medications, and the beneficiary’s share could increase. For people taking several prescriptions or relying on expensive medicines, the uncertainty made the coverage gap a significant financial concern.

The entry point was based on total drug costs, including amounts paid by the beneficiary and the Part D plan. In 2024, a beneficiary entered the donut hole after total covered drug costs reached $5,030. The person then remained in the gap until out-of-pocket spending reached $8,000, at which point catastrophic coverage began. These thresholds describe the 2024 rules and should not be used to estimate current costs. The National Council on Aging explains the former coverage gap and its 2024 thresholds, while Medical News Today also describes how spending changed at each stage.

Why the coverage gap was gradually closed

The Affordable Care Act began a gradual process of closing the donut hole. Over time, discounts and changing cost-sharing rules reduced the amount many beneficiaries paid while they were in the gap. However, the underlying coverage stage still created a point in the year when prescription costs could feel less predictable.

The Medicare Part D donut hole was officially eliminated on December 31, 2024, so it no longer exists beginning January 1, 2025. Part D now has three stages: the deductible stage, the initial coverage period, and catastrophic coverage. This structure applies to stand-alone Part D plans, and Medicare Advantage plans that include prescription drug coverage generally follow the same three-stage framework. For a closer look at the current changes, see the Medicare Part D plans 2026 redesign.

The old gap has been replaced with a simpler limit on covered prescription drug spending. The next section explains what the current coverage stages are and how they protect beneficiaries.

Medicare Part D Coverage Stages in 2026

The Medicare Part D donut hole is no longer a separate coverage stage. In 2026, prescription drug coverage follows three stages: the deductible phase, the initial coverage phase, and the catastrophic coverage phase. Knowing where you are in this sequence can make your drug costs easier to anticipate and help you understand the information in your plan statements.

1. Deductible phase

At the start of the calendar year, you may pay the full cost of your covered prescriptions until you meet your plan’s deductible. For 2026, no Medicare drug plan may charge a deductible higher than $615, and some plans have no deductible at all. Your actual deductible depends on the plan you choose, so review the plan details rather than assuming every plan uses the maximum.

Once you meet the deductible, you move into the initial coverage phase. The deductible is not a separate charge added to every prescription. It is the amount you pay before the plan begins sharing costs under its regular benefit structure.

2. Initial coverage phase

During initial coverage, you generally pay 25% coinsurance for covered generic and brand-name drugs, while the plan pays the remaining share. This continues until your out-of-pocket spending on covered Part D drugs reaches $2,100 in 2026. The medications covered, their tiers, and the pharmacy you use can still affect the price you pay for an individual prescription.

Your Explanation of Benefits, or EOB, can help you follow your progress. It shows the prescriptions you filled, what you paid, what the plan paid, your current coverage stage, and amounts that count toward your out-of-pocket spending. For a closer look at plan drug lists and coverage rules, review how Medicare prescription drug coverage works.

3. Catastrophic coverage phase

After your out-of-pocket spending reaches $2,100, you automatically enter catastrophic coverage. You pay $0 out of pocket for covered Part D drugs for the rest of the calendar year. Certain payments made on your behalf, including some Extra Help payments, may count toward the $2,100 threshold. The limit resets with the new calendar year, so your plan begins tracking the stages again in January.

This same three-stage structure generally applies to Medicare Advantage plans that include prescription drug coverage, known as MA-PD plans. However, premiums, formularies, networks, copays, and other plan rules can differ. Check your plan documents or speak with a licensed Medicare agent if you need help applying these stages to your prescriptions.

Medicare.gov explains the 2026 Part D costs and coverage stages, including the deductible limit, 25% coinsurance, and catastrophic coverage rules.

Old vs New: Part D Coverage Structure Compared

What Happens When You Reach Catastrophic Coverage

Once your out-of-pocket spending for covered Part D drugs reaches $2,100 in 2026, you automatically enter the catastrophic coverage stage. From that point through the end of the calendar year, you pay $0 out of pocket for covered Part D prescriptions. This protection applies after the spending threshold is reached, not simply because you have a high-cost medication.

What counts toward the $2,100 limit?

The calculation includes amounts you pay through your plan’s deductible, copayments, and coinsurance for covered drugs. Certain payments made on your behalf also count, including qualifying payments through the Extra Help program. Medicare explains that the threshold is based on out-of-pocket spending for covered Part D drugs, so costs for excluded drugs or other services may not apply. Your plan’s drug coverage rules still determine which prescriptions are covered.

The $2,100 limit replaces the older donut hole structure with a clearer annual protection. The Medicare Part D donut hole, also called the coverage gap, no longer exists as of December 31, 2024. In 2026, the three stages are the deductible stage, initial coverage, and catastrophic coverage. Instead of facing a separate coverage-gap phase, you move through the plan’s normal cost sharing until you reach the annual limit.

How to track your progress

Your plan’s Explanation of Benefits, or EOB, is the most useful document for monitoring your status. It lists prescriptions you filled, what the plan paid, what you and others paid, your current coverage stage, and the amounts that count toward your out-of-pocket costs. Review each EOB when it arrives and contact the plan if a payment or prescription appears to be missing.

Planning ahead can also help you minimize prescription drug costs before you reach the catastrophic stage. Keep in mind that the $0 protection applies to covered Part D drugs for the rest of that calendar year. Costs can begin again when a new plan year starts, so review your coverage and medication list annually.

Strategies to Minimize Your Prescription Drug Costs

Although the Medicare Part D donut hole no longer exists, your plan choice and prescription list still affect what you pay throughout the year. These steps can help you compare coverage, anticipate changes, and use the protections available in 2026.

1. Review your plan every year

   Use Medicare Open Enrollment, which runs from October 15 through December 7, to review your current coverage and compare available options. Formularies, premiums, pharmacy networks, and cost-sharing can change from one plan year to the next. A plan that worked well last year may not be the most practical choice after those changes. Review the Annual Notice of Change from your plan and confirm that its coverage still fits your needs.

2. Check your drugs and their tiers

   Before enrolling, verify every prescription on the plan’s formulary. Look at the tier assigned to each drug, because tier placement affects your copay or coinsurance. Also check whether your preferred pharmacy is in the plan’s network and whether mail-order pricing is available. For more detail, read our guide to how Medicare prescription drug coverage works.

3. Consider a low-premium plan when appropriate

   Even if you take few medications today, consider whether a plan with a low monthly premium makes sense for you. Maintaining creditable prescription drug coverage can help you avoid a late enrollment penalty if you later need Part D. The lowest premium is not automatically the lowest total cost, so compare the premium, deductible, drug tiers, pharmacy costs, and coverage rules together.

4. Track your progress with your EOB

   Read each Explanation of Benefits instead of filing it away. Your EOB lists prescriptions you filled, what the plan paid, what you and others paid, your current coverage stage, and what counts toward your out-of-pocket total. This helps you see how close you are to the 2026 $2,100 out-of-pocket threshold for covered Part D drugs and identify unexpected charges promptly. You can also review Medicare Part D plans 2026 for redesign details.

5. Apply for Extra Help if you qualify

   If your income and resources qualify, apply for Medicare’s Extra Help program. Assistance can reduce your prescription costs, and certain payments made on your behalf through Extra Help count toward the $2,100 out-of-pocket limit in 2026. Check your eligibility rather than assuming you earn too much, because qualification depends on your full financial situation.

6. Request a personalized plan review

   A licensed independent agent at My Senior Health Plan can review your prescriptions, preferred pharmacies, and available plan options with you. Contact us for a free, no-obligation plan review at (877) 255-6273. A review does not require you to change plans, and it can clarify which costs and coverage rules deserve attention before you enroll.

How the Inflation Reduction Act Changed Medicare Part D

The Inflation Reduction Act (IRA), signed into law in 2022, reshaped Medicare Part D to make prescription costs more predictable. One of its most important changes was removing the coverage gap, commonly called the Medicare Part D donut hole. The gap phase ended on December 31, 2024, so Part D moved into a simpler three-stage structure: deductible, initial coverage, and catastrophic coverage. Medicare Interactive explains the updated Part D stages.

A new limit on yearly prescription spending

Before the redesign, people with expensive medications could face a confusing progression of drug costs as they moved through coverage phases. The IRA replaced that uncertainty with an annual out-of-pocket limit for covered Part D drugs. The limit began at $2,000 in 2025 and is adjusted to $2,100 for 2026. After a beneficiary reaches that amount, catastrophic coverage begins, and covered Part D drugs cost nothing out of pocket for the rest of the calendar year. Medicare.gov details the 2026 Part D cost rules.

Costs are spread more evenly across the year

The IRA also created a payment option that allows eligible beneficiaries to spread their prescription costs across monthly payments. This lets them avoid paying a large amount when a single prescription is filled. This can make budgeting easier, particularly for people who reach the out-of-pocket limit early in the year. Ask your plan whether you can use the Medicare Prescription Payment Plan, and remember that it changes when you pay, not the total amount you owe.

Insulin and broader savings

For many people with diabetes, the law capped covered insulin copays at $35 per month. The law also expanded assistance for some beneficiaries through changes to the Medicare Part D Extra Help program. An estimated 3.2 million Americans were expected to save money on prescription medications in 2025 because of the 2022 law, according to an AARP report.

These changes do not make every prescription free, and formularies, premiums, deductibles, and pharmacy networks still vary by plan. However, eliminating the gap and adding a firm annual limit give beneficiaries a clearer ceiling on covered drug costs.

Frequently Asked Questions

Does Medicare have a donut hole in 2026?

No. The Medicare Part D donut hole, also called the coverage gap, was eliminated on December 31, 2024, so it is not a coverage phase in 2026. Part D now moves from the deductible stage to initial coverage and then catastrophic coverage. Medicare Interactive explains the change.

What replaced the Medicare donut hole?

The coverage gap was replaced by a three-stage structure and an annual out-of-pocket limit for covered Part D drugs. After the deductible, you generally pay plan-specific cost sharing during initial coverage. Once your qualifying out-of-pocket spending reaches the annual limit, catastrophic coverage begins.

What is the Part D out-of-pocket maximum in 2026?

The 2026 out-of-pocket maximum is $2,100 for covered Part D drugs. After you reach that amount, you enter catastrophic coverage and pay nothing out of pocket for covered Part D drugs for the rest of the calendar year. Certain payments made on your behalf, including some Extra Help payments, can count toward the limit. Medicare.gov provides the 2026 cost details.

What are the Part D coverage phases in 2026?

The three phases are the deductible phase, the initial coverage period, and the catastrophic coverage phase. A plan’s deductible cannot exceed $615 in 2026, although some plans have no deductible. After the deductible, beneficiaries generally pay 25% coinsurance until qualifying out-of-pocket spending reaches $2,100. Review the official phase guidance.

How can I minimize my prescription drug costs?

Review your plan each year, confirm that your prescriptions are on its formulary, and compare premiums and cost sharing before enrolling. If your current drug needs are limited, a low-premium plan may help you avoid a future late enrollment penalty. Your Explanation of Benefits shows your prescriptions, coverage stage, and progress toward the out-of-pocket limit, so use it to track changes throughout the year.

Ready to Review Your Medicare Part D Options?

Part D costs and coverage stages can be easier to evaluate when you have guidance tailored to your prescriptions and budget. Schedule a free consultation with a licensed Medicare agent to discuss your questions and compare available options. Call (877) 255-6273 to get started with a clear, no-pressure plan review.

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Pete Blasi

President/CEO at My Senior Health Plan

Pete Blasi, the driving force behind My Senior Health Plan and the prestigious Financial Grade Senior Consultants, has been at the helm of both since their inception in 2005. Under his leadership, these well-known and respected organizations have thrived to become renowned full-service Medicare consulting and brokerage firms with a nationwide presence.

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