Medicare Part D Donut Hole in 2026: What Changed and What You Pay

The Medicare Part D “donut hole” no longer exists in the way it did for decades. Since January 1, 2025, federal law replaced it with a hard annual cap on out-of-pocket prescription costs, and that cap rises with drug cost trends each year. For 2026 the cap is $2,100 (up from $2,000), the maximum deductible a plan may charge is $615 (up from $590), and Medicare’s payment plan option is in its second year — here’s what that means for your wallet.

A quick history: what the donut hole actually was

For years, Medicare Part D had four phases: a deductible, an initial coverage period, a coverage gap (the “donut hole”), and catastrophic coverage. Once you and your plan together spent a certain amount on covered drugs — the number changed annually — you’d fall into the gap and suddenly owe a much larger share of your drug costs, even though you were still paying premiums. The Affordable Care Act phased down what you paid in the gap over the 2010s, but the gap itself, and its confusing math, remained a permanent feature of Medicare until very recently.

The Inflation Reduction Act of 2022 eliminated the coverage gap phase entirely, effective with plan year 2025, according to CMS.gov. It replaced the old four-phase design with a simpler three-phase structure and, for the first time, a hard ceiling on what enrollees pay out of pocket in a year.

The new three-phase design, as it stands for 2026

Every standalone Part D plan and Medicare Advantage plan with drug coverage (MA-PD) now follows this basic shape:

1. Deductible phase. You pay 100% of your drug costs up to your plan’s deductible, if it has one. Not every plan charges the maximum allowed. For 2026, CMS caps the deductible at $615 (up from $590 in 2025) — many plans charge less or nothing at all, so check your plan’s Annual Notice of Change or Medicare.gov’s Plan Finder for the number your plan actually uses.

2. Initial coverage phase. After the deductible, you typically pay 25% coinsurance (or an equivalent copay) on covered drugs, and your plan and manufacturers cover the rest. This phase now runs continuously — there’s no longer a point where your cost-sharing jumps up mid-year.

3. Catastrophic coverage phase. Once your true out-of-pocket spending hits the annual cap, you pay $0 for covered Part D drugs for the rest of the calendar year. For 2025 that cap was $2,000. CMS’s annual Part D redesign parameters announcement projects a modest increase for 2026, generally in line with the growth in Medicare per capita drug spending used to set the figure each spring. Because CMS finalizes and publishes this number before each plan year, confirm the exact 2026 cap on CMS.gov or in your plan’s Evidence of Coverage before assuming a specific dollar figure.

What counts toward that cap? Your deductible, your coinsurance or copays in the initial coverage phase, and — importantly — manufacturer discounts on brand-name drugs count too. Your monthly premium does not count toward the cap.

Why there’s no more “hole” to fall into

Under the old system, the donut hole existed because the initial coverage phase had its own spending limit, and once you (plus your plan) crossed it, your cost-sharing structure changed for the worse until you hit catastrophic coverage. The 2025 redesign removed that middle spending limit altogether. Now you move directly from the deductible into a single initial coverage phase, and that phase ends only when you reach the $2,000-and-rising out-of-pocket cap — not when total spending hits some separate threshold. In effect, the “gap” was deleted, not just discounted.

What this looks like in dollars

The Medicare Prescription Payment Plan (M3P)

Alongside the new cap, Medicare introduced the Medicare Prescription Payment Plan, sometimes called “smoothing.” It lets you spread your out-of-pocket Part D costs across monthly payments for the rest of the calendar year, instead of paying large amounts at the pharmacy counter early in the year. This doesn’t lower your total costs — it’s a payment plan, not a discount — but it can help if a January refill would otherwise cost you several hundred dollars at once.

Every Part D plan and MA-PD plan must offer this option in 2026, according to CMS.gov. You opt in through your plan (not through Medicare directly), and you can do so at enrollment or during the plan year if your costs change. If you opt in mid-year, only your remaining out-of-pocket costs get spread over the months left in the year, so enrolling in January gets you the smoothest payments.

Who benefits most from the 2026 rules

• People on expensive brand-name specialty drugs. If you take a drug like certain cancer, arthritis, or diabetes medications that cost thousands per fill, the $2,100 cap is where the real savings show up. Before 2025, some enrollees paid $5,000, $8,000, or more out of pocket in a single year.
• People who used to “restart the clock” each January. Because catastrophic coverage resets every calendar year, front-loaded costs in January and February are still a real budgeting issue — this is exactly what M3P is designed to soften.
• Low-income subsidy (Extra Help) recipients. If you qualify for the Part D Low-Income Subsidy, your costs are already lower than the standard structure described here, and the donut hole changes matter less to you directly, though the overall $2,000 cap still applies as a backstop. Check your specific cost-sharing tier on SSA.gov or with your State Health Insurance Assistance Program (SHIP).

Do you need to do anything?

The out-of-pocket cap applies automatically if you’re enrolled in a Medicare Part D plan or an MA-PD plan — there’s no separate application. Two things you may want to actively do:

1. Opt into the Medicare Prescription Payment Plan if you expect high drug costs early in the year. Contact your plan directly; CMS requires plans to process requests within 24 hours.
2. Compare plans during Open Enrollment (October 15–December 7 each year, for coverage starting January 1). Even with the cap in place, premiums, deductibles up to the maximum, and which specific drugs are on formulary still vary a lot by plan. Use the Medicare Plan Finder at Medicare.gov to compare your specific drug list against different plans’ 2026 costs.

What hasn’t changed

• Part D premiums are not capped by this law and can still vary widely by plan and region.
• Formularies (which drugs a plan covers, and at what tier) still differ from plan to plan.
• The deductible and out-of-pocket cap are recalculated every year, so 2027’s numbers will be different from 2026’s. Always check the current year’s figures rather than relying on last year’s article, including this one.

FAQ

Is the donut hole completely gone in 2026?

Yes. The coverage gap phase was eliminated starting with plan year 2025 under the Inflation Reduction Act, and that structure continues for 2026. Part D now has three phases — deductible, initial coverage, and catastrophic — instead of the old four-phase design with a gap in the middle.

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

For 2026 it’s $2,100, up from $2,000 in 2025. CMS adjusts the figure annually based on drug spending trends and publishes it in the Part D Redesign Program Instructions before each plan year. Once your out-of-pocket spending on covered drugs reaches that amount, you pay $0 for covered drugs for the rest of the calendar year.

Do I have to sign up for the Medicare Prescription Payment Plan to get the $2,000 cap?

No. The out-of-pocket cap applies automatically to everyone with Part D or MA-PD coverage — you don’t need to opt into anything for the cap itself. The Medicare Prescription Payment Plan is a separate, optional feature that only affects how you pay (spread over months) rather than how much you ultimately owe for the year.

Sources

• CMS.gov — Medicare Part D Improvements from the Inflation Reduction Act: https://www.cms.gov
• Medicare.gov — Costs for Medicare drug coverage: https://www.medicare.gov
• CMS.gov — Medicare Prescription Payment Plan: https://www.cms.gov
• SSA.gov — Extra Help with Medicare prescription drug plan costs: https://www.ssa.gov

Related reading

• Social Security COLA for 2026: How Much Bigger Will Your Check Be?
• Medicare Open Enrollment: Dates, What You Can Change, and Costly Mistakes
• Medicare Advantage vs Original Medicare: A Plain-English Comparison

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