Georgia Medicare Donut Hole: History, Closure, and the $2,000 OOP Cap

By Brevy Care Team · Last verified May 13, 2026

For nearly two decades, the Medicare Part D "coverage gap" (commonly called the donut hole) defined senior prescription drug economics in Georgia and across America. Created by the Medicare Modernization Act of 2003 (MMA, Public Law 108-173) as part of the original Part D benefit at Section 1860D-2(b) of the Social Security Act, the gap was a phase in the standard drug benefit where beneficiaries paid 100% of drug costs out of pocket after exceeding the initial coverage limit but before reaching catastrophic coverage. For a Georgia retiree on a brand-name maintenance medication, the gap could mean thousands of dollars in unexpected pharmacy bills, often hitting in the middle of the year when seniors least expected it.

The Affordable Care Act of 2010 (ACA, Public Law 111-148) at Section 3301 began gradually closing the gap through manufacturer discounts and incremental coinsurance reductions. The Bipartisan Budget Act of 2018 (BBA 2018, Public Law 115-123) at Section 53116 accelerated closure to 2019 for brand drugs and 2020 for generics, and increased the manufacturer discount from 50% to 70%. Then the Inflation Reduction Act of 2022 (IRA, Public Law 117-169) at Section 11201 went the furthest: it eliminated the coverage gap phase entirely effective January 1, 2025, replaced it with a single $2,000 annual out-of-pocket cap, and reduced catastrophic-phase cost-sharing to $0 for the beneficiary.

This guide explains the complete history of the Medicare Part D coverage gap, walks through the federal statutory and regulatory framework that created and ultimately eliminated it, details True Out-of-Pocket (TrOOP) accumulation rules that determined when seniors moved through the phases, and shows what Georgia families need to know about the new $2,000 cap and the Medicare Prescription Payment Plan (M3P). Six worked examples illustrate how the same Georgia retiree's drug-spending experience would have unfolded in 2010 (full donut hole), 2015 (transition years), 2020 (gap "closed" via incremental reductions), 2024 (last year before the IRA cap), and 2025 (under the new $2,000 cap with M3P).

::: hero Georgia Medicare Coverage Gap (Donut Hole) at a glance

• Federal authority: Section 1860D-2(b) of the Social Security Act (42 USC 1395w-102(b)) established the original four-phase Part D benefit including the coverage gap. Section 1860D-14A (added by ACA Section 3301) created the Coverage Gap Discount Program. Section 1860D-14C (added by IRA Section 11201) replaced it with the Manufacturer Discount Program effective 2025.
• 2025 transformation: The Inflation Reduction Act 2022 Section 11201 eliminated the coverage gap entirely effective January 1, 2025. Beneficiaries now pay the Part D deductible, then 25% coinsurance until reaching a $2,000 annual out-of-pocket cap, then $0 cost-sharing for the rest of the year.
• 2026 standard benefit: $590 deductible, 25% initial coverage coinsurance, $2,000 OOP cap, $0 catastrophic.
• Monthly spread option: The Medicare Prescription Payment Plan (M3P) under IRA Section 11202 lets Georgia beneficiaries spread the $2,000 out-of-pocket across 12 monthly installments (about $167 per month at maximum), so a $2,000 hit in February becomes a smoothed bill.
• What still matters from the donut hole era: True Out-of-Pocket (TrOOP) rules still govern how costs accumulate toward the $2,000 cap. Plan premiums, out-of-network drugs, and drugs not on the plan formulary do not count toward the OOP cap.
• For Georgia families: GeorgiaCares (1-866-552-4464), the state SHIP program, provides free one-on-one Part D counseling to help Georgia seniors understand the new structure and compare plans. :::

Federal framework: Section 1860D and the evolution of the coverage gap

The Medicare prescription drug benefit (Part D) was created by the Medicare Modernization Act of 2003 (MMA, Public Law 108-173) and took effect on January 1, 2006. Under Section 1860D-2(b) of the Social Security Act, codified at 42 USC 1395w-102(b), Congress designed a standard benefit with four distinct phases that determined how beneficiaries and the government shared prescription drug costs throughout the year.

Phase 1: Deductible

The first phase required beneficiaries to pay 100% of drug costs up to an annual deductible. The 2006 deductible was $250. By 2010 it had risen to $310. By 2020 it reached $435. By 2026 it stands at $590. The deductible is adjusted annually based on per capita Part D drug spending growth. Most plans offer a deductible at or below the statutory maximum; some plans offer a $0 deductible by accepting lower benefits or higher premiums elsewhere.

Phase 2: Initial coverage

After the deductible, beneficiaries entered the initial coverage phase where they paid 25% coinsurance (the federal standard) or the plan's tier-based copayments. This phase continued until the beneficiary's total drug spending (combining what the beneficiary, the plan, and any third party paid) reached the Initial Coverage Limit (ICL). The 2010 ICL was $2,830. The 2015 ICL was $2,960. The 2020 ICL was $4,020. The 2024 ICL was $5,030. Under the Inflation Reduction Act of 2022, the ICL concept no longer applies effective 2025: instead beneficiaries pay 25% coinsurance until their true out-of-pocket reaches $2,000.

Phase 3: Coverage gap (donut hole)

This is the phase that earned Part D its bad reputation. From 2006 through 2010, beneficiaries who exceeded the ICL paid 100% of drug costs out of pocket until reaching the True Out-of-Pocket (TrOOP) threshold for catastrophic coverage. For a Georgia retiree on a $300 per month brand-name medication, the gap might begin in August and last until December, costing thousands of unexpected dollars. The gap got its "donut hole" nickname because the cost-sharing shape resembled a donut: low costs at the start of the year (deductible plus 25% coinsurance), then a big hole in the middle where the beneficiary paid everything, then low costs again at the top (catastrophic 5% coinsurance).

Phase 4: Catastrophic coverage

Once the beneficiary's TrOOP reached the catastrophic threshold ($4,550 in 2010, $6,350 in 2020, $8,000 in 2024), they entered catastrophic coverage where they paid 5% coinsurance (with minimum copayments of about $4.15 for generic and $10.35 for brand in 2024). Plans paid 15%, and the federal government paid 80% through reinsurance. Catastrophic coverage was protective but most beneficiaries with chronic conditions still incurred substantial OOP costs reaching it. Effective 2025 under IRA Section 11201, catastrophic-phase cost-sharing was reduced to $0 for the beneficiary.

The ACA 2010 Coverage Gap Discount Program (CGDP)

The Affordable Care Act of 2010 (Public Law 111-148) at Section 3301 began closing the donut hole. The law created the Coverage Gap Discount Program, codified at Section 1860D-14A of the Social Security Act and 42 CFR 423.2300 to 423.2345. Effective January 1, 2011, brand-name drug manufacturers were required to provide a 50% discount on the price of brand drugs purchased by Medicare beneficiaries in the coverage gap. This discount counted toward the beneficiary's TrOOP, accelerating their move to catastrophic coverage. Generic drug coinsurance was gradually reduced through annual federal subsidies built into the benefit design.

The gradual closure schedule under ACA Section 3301 reduced beneficiary cost-sharing in the gap as follows: 2011 brand at 50% beneficiary; 2013 brand at 47.5%; 2015 brand at 45%; 2017 brand at 40%; 2020 brand at 25%. Generic coinsurance phased down from 93% in 2011 to 25% by 2020. By 2020, ACA Section 3301 had achieved its goal of "closing" the donut hole in the sense that beneficiaries paid the same 25% throughout the deductible-completion, initial coverage, and former-gap phases.

The Bipartisan Budget Act 2018 acceleration

The Bipartisan Budget Act of 2018 (Public Law 115-123) at Section 53116 accelerated and modified the ACA closure. Effective January 1, 2019, BBA 2018 accomplished two things. First, it pulled the brand-drug closure forward by one year so brand-drug coinsurance dropped to 25% in 2019 instead of 2020. Second, it increased the manufacturer discount on brand drugs from 50% to 70%, shifting more of the gap cost to pharmaceutical manufacturers and away from beneficiaries and the federal government. The plan share of brand-drug cost in the gap dropped to 5%.

From 2019 through 2024, the coverage gap technically still existed as a phase for cost-sharing accounting purposes (manufacturer pays 70%, beneficiary pays 25%, plan pays 5% for brand drugs), but the beneficiary experience was relatively continuous: 25% coinsurance throughout. The gap phase still mattered because it affected how TrOOP accumulated. The 70% manufacturer discount still counted toward TrOOP, meaning beneficiaries reached catastrophic coverage faster than they would have if they paid the full discounted amount themselves.

The Inflation Reduction Act 2022 transformation

The Inflation Reduction Act of 2022 (Public Law 117-169) represents the most consequential Part D reform since the program's 2006 launch. Three provisions reshape the coverage gap framework.

Section 11201 restructured the entire Part D standard benefit effective January 1, 2025. The coverage gap phase was eliminated entirely. The new structure has three phases: deductible, initial coverage at 25% coinsurance until the beneficiary reaches $2,000 out-of-pocket, then catastrophic coverage at $0 beneficiary cost-sharing for the rest of the year. The $2,000 cap is indexed annually to per capita Part D drug spending growth and remains $2,000 for 2026. Section 11201 also replaced the Coverage Gap Discount Program with a new Manufacturer Discount Program at Section 1860D-14C, requiring manufacturers to provide a 10% discount in initial coverage and a 20% discount in catastrophic for applicable beneficiaries.

Section 11202 created the Medicare Prescription Payment Plan (M3P) effective January 1, 2025. M3P is a voluntary program letting beneficiaries spread their out-of-pocket costs across monthly installments instead of paying at the pharmacy counter. The final rule appeared at 89 Federal Register 71684 (September 2024). For a Georgia beneficiary on a high-cost specialty drug like Enbrel who would hit the $2,000 OOP cap in January, M3P lets them spread that $2,000 across 12 months (about $167 per month) so the cash-flow shock is smoothed.

Section 11401 created the Medicare Drug Price Negotiation Program. The first 10 negotiated prices took effect January 1, 2026, for Eliquis, Jardiance, Xarelto, Januvia, Farxiga, Entresto, Enbrel, Imbruvica, Stelara, and Fiasp/NovoLog. Maximum Fair Prices reduce list prices by 38% to 79%. Lower negotiated prices change the coverage-gap math for users of these drugs: the same drug now costs less per fill, so beneficiaries reach the $2,000 cap with less total fill volume.

True Out-of-Pocket (TrOOP): how costs accumulate

True Out-of-Pocket, abbreviated TrOOP, is the accounting concept that governed when a beneficiary moved through Part D's phases and now governs when they hit the $2,000 cap. Understanding what counts toward TrOOP and what does not is essential to predicting drug costs in Georgia.

What counts toward TrOOP and the $2,000 OOP cap

• Deductible payments made by the beneficiary
• Coinsurance and copayments paid by the beneficiary in initial coverage
• In years with a coverage gap, payments by the beneficiary in the gap (including the manufacturer discount counted as if paid by the beneficiary)
• Payments made on behalf of the beneficiary by family members, friends, or charitable organizations (with some limits)
• Low Income Subsidy (LIS Extra Help) cost-sharing payments count as if paid by the beneficiary
• State Pharmaceutical Assistance Programs (SPAPs) in some cases

What does NOT count toward TrOOP or the $2,000 OOP cap

• Plan premiums (the monthly amount you pay the plan)
• Drugs purchased at out-of-network pharmacies (except in emergencies)
• Drugs not on the plan formulary (unless an exception is granted)
• Over-the-counter drugs
• Drugs excluded from Part D coverage by statute (e.g., weight loss agents, fertility drugs, cosmetic drugs, agents for sexual or erectile dysfunction in some cases)
• Payments by third-party insurance such as employer or group health plans
• AIDS Drug Assistance Program (ADAP) payments (counted differently)
• Indian Health Service (IHS) payments

Georgia beneficiaries with employer retiree drug coverage need to pay particular attention to TrOOP rules. If the employer plan pays drug costs, those payments do not count toward the Medicare Part D $2,000 OOP cap. Coordination of benefits between employer plans and Part D can be complex; GeorgiaCares (1-866-552-4464) provides free counseling.

The 2026 standard benefit design

Under the Inflation Reduction Act 2022 framework as adjusted for 2026, the Part D standard benefit looks like this:

• Deductible: $590 (some plans offer lower or $0)
• Initial coverage: 25% coinsurance until $2,000 OOP reached
• Out-of-pocket maximum: $2,000 (indexed annually)
• Catastrophic coverage: $0 beneficiary cost-sharing
• National base beneficiary premium: $36.78 per month (varies by plan)

Plans may offer "enhanced" benefits with lower deductibles, lower coinsurance, or supplemental drug coverage. Plans must offer at least the standard benefit (or actuarially equivalent) but may improve on it. Georgia families comparing plans during the Annual Enrollment Period (October 15 to December 7) should look beyond the premium to the deductible, the formulary (whether your specific drugs are covered), the tier placement of your drugs, the pharmacy network (preferred vs standard), and any mail-order options.

Medicare Prescription Payment Plan (M3P): spreading the $2,000

The Medicare Prescription Payment Plan, codified at Section 1860D-2(b)(2)(E) of the Social Security Act as added by IRA Section 11202, lets Georgia beneficiaries spread their out-of-pocket prescription drug costs across monthly installments. Here is how it works.

Who should consider M3P

• Beneficiaries with high-cost specialty drugs likely to hit the $2,000 OOP cap early in the year
• Beneficiaries with cash flow concerns who would struggle to pay $500 to $1,000 at the pharmacy counter in a single month
• Beneficiaries who prefer predictable monthly billing
• Beneficiaries on fixed retirement income for whom a big February pharmacy bill could disrupt budgets

How M3P works in practice

When a beneficiary opts in to M3P, the plan pays the pharmacy in full at the point of sale. The pharmacy collects $0 from the beneficiary. The plan then bills the beneficiary monthly for what they would have paid at the counter, spread across the remaining months of the year. The monthly bill is calculated dynamically based on actual fills.

For example, a Georgia beneficiary who opts in to M3P in January and is on Eliquis (with negotiated price effective 2026): if their annual OOP for Eliquis is projected at $2,000, they pay roughly $167 per month from January through December. If they fill a new high-cost specialty drug mid-year, the monthly billing recalculates to spread the new costs across the remaining months.

How to enroll in M3P

• Enroll at any time during the year, not just during Annual Enrollment Period
• Contact your Part D plan directly (number on member ID card) or 1-800-MEDICARE
• Plans must offer M3P; it is a mandatory program for plans, voluntary for beneficiaries
• Enrollment is not retroactive : costs incurred before enrollment are not spread
• Beneficiaries can opt out at any time, but any unpaid balance must still be paid per the plan's terms

M3P does not change total cost

Critically, M3P does not reduce what the beneficiary owes : it only smooths the timing. The total annual OOP under M3P equals the total annual OOP without M3P (capped at $2,000 under the IRA cap). M3P is a cash flow tool, not a discount program.

Coverage gap mechanics by year: comparative

To understand how the coverage gap evolved, consider the same Georgia retiree (Margaret, age 65, Atlanta) with $5,000 in annual brand-name drug spending in different years.

2010 (full donut hole)

• Deductible: $310 (Margaret pays 100% up to $310)
• Initial coverage: 25% of next $2,520 in drug costs = $630 (until ICL of $2,830)
• Coverage gap: Margaret pays 100% from $2,830 until TrOOP of $4,550
  • TrOOP already includes $310 + $630 = $940
  • Margaret needs $3,610 more in OOP to reach catastrophic
  • At 100% she pays $3,610 in gap (drug spend in gap = $3,610)
• Catastrophic: 5% of remaining drug spend
  • Total drug spend: $310 (deductible) + $2,520 (initial coverage) + $3,610 (gap) = $6,440
  • Wait : Margaret's annual drug spend is $5,000, so she may not reach catastrophic
  • Recalculate: $310 + $2,520 + ($5,000 - $310 - $2,520) = $5,000 with last $2,170 in gap at 100%
  • Total OOP: $310 + $630 + $2,170 = $3,110

2015 (mid-transition)

• Manufacturer 55% brand discount + 5% plan + 45% beneficiary in gap
• Margaret's OOP in gap on brand drugs: 45% instead of 100%
• Same drug spend, OOP roughly $2,200 (estimate, varies by drug)

2020 (gap closed, BBA 2018 implementation)

• 25% coinsurance throughout deductible-completion, initial coverage, and former gap
• TrOOP accumulates faster because manufacturer 70% discount counts toward TrOOP
• Margaret's OOP roughly $1,400 (estimate)

2024 (last year before IRA cap)

• 25% coinsurance throughout, catastrophic at $8,000 TrOOP with 5% beneficiary
• Margaret's OOP for $5,000 spend: 25% = $1,250 (does not reach catastrophic at $5,000 spend)

2025 and 2026 (IRA $2,000 cap)

• Deductible $590, then 25% until OOP reaches $2,000, then $0
• Margaret's OOP for $5,000 spend: $590 deductible + 25% × ($5,000 - $590) = $590 + $1,103 = $1,693
• Margaret does not reach the $2,000 cap on $5,000 spend
• If her spend were $10,000+: she would reach the $2,000 cap and pay $0 after

Plan types: PDP and MA-PD

Medicare beneficiaries access Part D through two plan structures.

Standalone Prescription Drug Plans (PDPs)

• Pair with Original Medicare (Parts A and B)
• Cover prescription drugs only
• Beneficiary holds Original Medicare for medical and Medigap (if elected) for cost-sharing supplementation
• Georgia has 20 to 30 PDP options available statewide for 2026
• PDP carriers in Georgia include SilverScript (Aetna/CVS), Humana, AARP UnitedHealthcare, WellCare, Cigna, and others

Medicare Advantage Prescription Drug Plans (MA-PDs)

• Integrate Part A, Part B, and Part D into a single plan
• Generally HMO or PPO structure with network requirements
• Drug benefits subject to plan formulary and tier structure
• Georgia has 25 to 50 MA-PD options per county
• MA-PD carriers in Georgia include Humana, Aetna, UnitedHealthcare, Anthem BCBS, WellCare, Kaiser Permanente (in Atlanta metro), and Cigna

The $2,000 OOP cap applies to both PDPs and MA-PDs. Beneficiaries on MA-PD plans also have a separate Medical OOP maximum (up to $9,350 in-network for 2026) that does not interact with the $2,000 drug cap.

Six worked examples: the coverage gap across the years

Worked example 1: Margaret 2010 full donut hole

Margaret, 65, an Atlanta retiree, took Lipitor (statin), Lisinopril (blood pressure), and a brand-name antidepressant in 2010 totaling about $5,000 per year in drug costs. Her Part D plan had a $310 deductible.

Margaret's 2010 Part D cost breakdown:

• January through March: filled $310 in drugs out of pocket (deductible phase)
• April through August: paid 25% coinsurance until total drug spend hit $2,830 ICL. Her OOP for this phase was about $630.
• September through November: entered the coverage gap. With $5,000 in annual spend, she had $2,170 to spend in the gap ($5,000 - $2,830 = $2,170). At 100% beneficiary cost, she paid $2,170 out of pocket.
• December: she did not reach the $4,550 catastrophic threshold because her total drug spend was $5,000, not enough to push TrOOP that high.
• Margaret's total 2010 OOP: $3,110 on $5,000 in drug spend (62% of drug costs).

Worked example 2: Robert 2015 transition year

Robert, 70, a Savannah retiree, took a similar drug regimen in 2015 totaling $5,000 in annual costs. By 2015, the ACA gap-closure schedule had reduced beneficiary brand-drug coinsurance in the gap to 45%, with manufacturers providing a 55% discount.

Robert's 2015 Part D cost breakdown:

• Deductible: $320 (slightly higher 2015 threshold)
• Initial coverage: 25% of next $2,640 = $660
• Coverage gap: 45% beneficiary on brand drugs (manufacturer 55% discount applied)
  • Drug spend in gap: $5,000 - $2,960 (ICL) = $2,040
  • Robert's OOP at 45%: $918
• Robert's total 2015 OOP: $1,898 on $5,000 in drug spend (38% of drug costs).

Compared to Margaret's 2010 experience, Robert in 2015 paid roughly $1,200 less for the same drug regimen, reflecting the partial gap closure.

Worked example 3: Linda 2020 gap "closed"

Linda, 67, a Macon retiree, took a similar regimen in 2020. By 2020, both brand and generic gap coinsurance had reached 25% under BBA 2018 acceleration. Manufacturers provided a 70% brand discount.

Linda's 2020 Part D cost breakdown:

• Deductible: $435 (2020 standard)
• Initial coverage: 25% of next $3,585 = $896 (until ICL of $4,020)
• Coverage gap: 25% beneficiary throughout
  • Drug spend in gap: $5,000 - $4,020 = $980
  • Linda's OOP at 25%: $245
• Linda's total 2020 OOP: $1,576 on $5,000 in drug spend (32% of drug costs).

Compared to Margaret's 2010, Linda's 2020 OOP was about half. The gap was no longer financially painful, just an accounting phase.

Worked example 4: Charles 2024 just before the IRA cap

Charles, 73, an Augusta retiree on more aggressive medications including a biologic (Enbrel for rheumatoid arthritis at $7,000 per month list price), incurred high drug spending in 2024. His annual drug spend reached $80,000 due to Enbrel.

Charles's 2024 Part D cost breakdown:

• Deductible: $545 (2024 standard)
• Initial coverage: 25% of next $4,485 = $1,121 (until ICL of $5,030)
• Coverage gap: 25% beneficiary on brand drugs, with 70% manufacturer discount counting toward TrOOP
  • Charles's TrOOP accumulated quickly because of manufacturer discounts
  • Charles reached catastrophic threshold ($8,000 TrOOP) by approximately March
• Catastrophic: 5% of remaining drug spend
  • From catastrophic onset to year end, Charles's drug spend was roughly $75,000 at 5% = $3,750
• Charles's total 2024 OOP: roughly $5,000 to $5,500 on $80,000 in drug spend (6% to 7% of drug costs).

Even with catastrophic coverage, Charles paid thousands of dollars out of pocket in 2024 : a substantial burden on a fixed retirement income.

Worked example 5: Patricia 2025 IRA $2,000 cap

Patricia, 65, a Columbus retiree, was prescribed Eliquis (apixaban) for atrial fibrillation in January 2025 at $525 per month list price. Her annual Eliquis cost would total $6,300 without coverage.

Patricia's 2025 Part D cost breakdown:

• Deductible: $590 (2025 standard)
  • January 1 to about January 28: pays first $590 in drug costs (a bit more than one month of Eliquis)
• Initial coverage: 25% coinsurance from $590 to $2,000 OOP
  • From January 28: $2,000 - $590 = $1,410 more OOP at 25% = $5,640 in drug spend at full price
  • Patricia reaches $2,000 OOP around late March or early April
• Catastrophic: $0 cost-sharing for the rest of the year
• Patricia's total 2025 OOP: $2,000 (capped) on $6,300 in drug spend (32% of drug costs).

Compared to Charles's 2024, Patricia in 2025 benefits from a hard $2,000 ceiling. Her $2,000 cap rolls over each year on January 1.

Worked example 6: Henry 2025 M3P monthly spread

Henry, 75, an Athens retiree, was prescribed two specialty drugs in 2025 with combined annual cost projected at $25,000. He would clearly hit the $2,000 OOP cap by February.

Henry's 2025 Part D cost breakdown without M3P:

• January: $590 deductible plus some 25% coinsurance = roughly $1,200 OOP in January
• February: remaining OOP to reach $2,000 cap = $800
• March through December: $0 cost-sharing
• Henry pays $1,200 in January and $800 in February (or $2,000 total in February if drugs filled late in month)

Henry's 2025 Part D cost breakdown with M3P (enrolled in December 2024 for January 1 effective):

• Plan calculates projected annual OOP at $2,000
• Plan bills Henry $167 per month ($2,000 / 12) starting January
• Pharmacy collects $0 from Henry at each fill
• Total annual cost to Henry: $2,000 spread evenly
• Henry's monthly cash flow protected from January spike; no change to total annual cost.

For Henry on a fixed pension, the M3P spread is the difference between affordable predictability and a painful $1,200 January pharmacy bill.

Plan formularies: what is covered

Even with the $2,000 OOP cap, Georgia beneficiaries need to understand plan formularies because the cap only applies to covered drugs. A drug not on your plan's formulary will not count toward your $2,000 OOP unless you obtain a coverage exception.

Formulary structure

Plans organize covered drugs into tiers:

• Tier 1 (preferred generic): lowest copayment
• Tier 2 (generic): low copayment
• Tier 3 (preferred brand): moderate copayment or coinsurance
• Tier 4 (non-preferred brand): higher copayment or coinsurance
• Tier 5 (specialty): typically 25% to 33% coinsurance

Protected classes

Section 1860D-4(b)(3)(G) of the Social Security Act requires Part D plans to cover "all or substantially all" drugs in six protected classes:

1. Anticonvulsants
2. Antidepressants
3. Antineoplastics (cancer drugs)
4. Antipsychotics
5. Antiretrovirals (HIV/AIDS drugs)
6. Immunosuppressants for transplant rejection

For these classes, plans cannot exclude drugs from the formulary except under narrow circumstances. Beneficiaries on these medications have stronger formulary protections.

Coverage exceptions

If your drug is not on the plan's formulary, you can request a coverage exception under Section 1860D-4(g) and 42 CFR 423.578. Your physician must support the request with medical justification. The plan has 72 hours to decide a standard exception or 24 hours for expedited (when a delay could jeopardize your health). If denied, you can appeal through the 5-level appeals process.

Pharmacy networks: preferred vs standard

Part D plans contract with pharmacies in two tiers.

Preferred pharmacies: lower copayments or coinsurance for beneficiaries. Plans negotiate better prices and pass some savings to enrollees. In Georgia, preferred pharmacies often include chain retailers like CVS, Walgreens, Walmart, Kroger, and Publix, plus regional chains. Each plan's preferred network is different.

Standard pharmacies: higher copayments but still in-network. The plan still covers the drug, but the beneficiary pays more.

Out-of-network pharmacies: generally not covered except in emergencies. Costs at out-of-network pharmacies do not count toward the $2,000 OOP cap.

Mail-order pharmacies: often the lowest-cost option for 90-day fills of maintenance medications. Plans typically partner with one mail-order pharmacy (e.g., CVS Caremark Mail Service, Express Scripts Home Delivery, OptumRx Mail Service).

Georgia beneficiaries comparing plans during AEP should check whether their preferred local pharmacy is in the plan's preferred network, the standard network, or out of network. A switch from preferred to standard can mean hundreds of dollars more in annual cost-sharing.

Medicare Drug Price Negotiation: effect on coverage gap math

Under IRA Section 11401, codified at Section 1191 et seq. of the Social Security Act, CMS negotiates prices for high-spend Part D and Part B drugs. The first 10 negotiated prices took effect January 1, 2026, for these Part D drugs:

Maximum Fair Prices (MFPs) reduce list prices by 38% to 79%. For a Georgia beneficiary on Eliquis, the 2026 price drops substantially compared to 2024. The next 15 drugs are scheduled for negotiation effective 2027, then 20 more drugs per year through 2030.

Lower negotiated prices change the coverage-gap math: at lower per-fill cost, the beneficiary reaches the $2,000 OOP cap with more total fills before hitting catastrophic. For a beneficiary whose only Part D drug is one of the negotiated 10, lower prices may mean they never reach the $2,000 cap.

Low Income Subsidy (Extra Help) and the coverage gap

For Georgia beneficiaries with income below 150% of the federal poverty level (about $1,883 per month for individuals in 2026) and limited resources, the Low Income Subsidy (Extra Help) under Section 1860D-14 of the Social Security Act provides additional cost protections. Effective 2024 under IRA Section 11404, Extra Help expanded to provide full benefits at 150% FPL (previously partial benefits applied at 135%-150%).

LIS recipients in Georgia pay:

• $0 premium (for benchmark plans)
• $0 deductible
• Reduced copayments (e.g., $1.55 generic, $4.60 brand for non-institutionalized recipients in 2026)
• $0 in catastrophic coverage

For LIS beneficiaries, the $2,000 OOP cap is largely moot because LIS already eliminates most cost-sharing. The 2024 expansion of LIS provided a significant benefit to Georgia low-income seniors, many of whom previously qualified only for partial LIS.

15 common mistakes Georgia beneficiaries make about the donut hole

1. Thinking the donut hole still exists in 2025 and beyond. It does not. The IRA Section 11201 eliminated it effective January 1, 2025. Replace the donut-hole mental model with the new $2,000 OOP cap framework.

2. Confusing TrOOP with total drug spend. TrOOP is what counts toward the $2,000 cap, including beneficiary payments, family contributions, charitable assistance, and LIS subsidies. Plan payments do not count.

3. Believing plan premiums count toward the $2,000 OOP cap. They do not. The monthly premium is separate from cost-sharing.

4. Missing M3P enrollment for high-cost medications. A Georgia retiree on Enbrel who would hit $2,000 in January benefits significantly from spreading that across 12 months at $167/month.

5. Assuming out-of-network drug costs count toward the OOP cap. They do not. Use in-network pharmacies for the cost protections to apply.

6. Confusing the $2,000 OOP cap with the $35 insulin cap. These are different IRA provisions. Insulin (covered under Part D or Part B) is capped at $35/month per prescription; the $2,000 cap is the overall annual Part D OOP limit.

7. Believing all drugs are covered after the $2,000 cap. Plan formulary still applies. A drug not on formulary is not covered (unless exception granted) regardless of how much you have spent.

8. Missing the formulary tier of your medications. Tier 5 specialty drugs at 25% to 33% coinsurance can drive rapid accumulation toward the cap. Compare plans on tier placement, not just premium.

9. Confusing the Coverage Gap Discount Program (pre-2025) with the Manufacturer Discount Program (post-2025). Section 1860D-14A (ACA) provided the 70% manufacturer discount in the gap. Section 1860D-14C (IRA) replaced it with a 10% / 20% discount applicable in initial coverage and catastrophic phases.

10. Believing the $2,000 cap applies to Medicare Part B drugs. It does not. The cap is Part D only. Part B drugs (administered in physician offices) have different cost-sharing.

11. Not realizing LIS Extra Help largely eliminates the $2,000 cap concern. Georgia beneficiaries below 150% FPL should apply for LIS through SSA (1-800-772-1213); approval provides cost-sharing reductions well below the $2,000 cap.

12. Missing the annual reset. The $2,000 OOP cap restarts each January 1. A beneficiary who hit the cap in March 2025 starts over at $0 OOP on January 1, 2026.

13. Confusing M3P with manufacturer patient assistance programs. M3P spreads what you pay your Part D plan. Manufacturer programs (e.g., Eli Lilly's Insulin Value Program) provide drug-specific assistance separate from Medicare.

14. Believing the Coverage Gap "still exists" because of CMS phase terminology. While CMS documentation may reference "initial coverage phase" and "catastrophic phase," the gap phase no longer exists. The benefit goes deductible → initial coverage → catastrophic.

15. Missing the Annual Enrollment Period (October 15 to December 7) to change plans. A formulary change can cost a Georgia beneficiary thousands if their medication moves to a higher tier or is removed. AEP is the time to compare plans based on next year's formulary.

Quick reference: 2026 Part D cost framework

::: callout type="key-takeaways" Key takeaways

• The Medicare Part D coverage gap (donut hole) was created in 2006 under MMA Section 1860D, gradually closed by ACA 2010 Section 3301 and BBA 2018 Section 53116, and eliminated entirely effective January 1, 2025, by IRA 2022 Section 11201.
• The 2026 Part D benefit has three phases: $590 deductible, 25% initial coverage coinsurance, $2,000 out-of-pocket cap, then $0 catastrophic coverage.
• True Out-of-Pocket (TrOOP) determines when the $2,000 cap is reached. Plan premiums, out-of-network drugs, and non-formulary drugs do not count toward the cap.
• The Medicare Prescription Payment Plan (M3P) under IRA Section 11202 lets Georgia beneficiaries spread the $2,000 OOP across 12 monthly installments (about $167 per month). Enrollment is voluntary, year-round, and contact your plan to opt in.
• Low Income Subsidy (Extra Help) under Section 1860D-14, expanded by IRA 2022 to 150% FPL effective 2024, eliminates most Part D cost-sharing for Georgia beneficiaries below the threshold.
• Medicare Drug Price Negotiation under IRA Section 11401 reduces 2026 prices for 10 high-spend drugs, including Eliquis, Jardiance, and Enbrel, changing the math of how quickly the $2,000 cap is reached.
• GeorgiaCares (1-866-552-4464) provides free one-on-one counseling to Georgia seniors comparing Part D plans and understanding the new $2,000 cap. :::

::: accordion

What was the Medicare donut hole?

The Medicare donut hole was the coverage gap phase of Part D from 2006 through 2024 where beneficiaries paid 100% of drug costs (or a high percentage) after exceeding the Initial Coverage Limit but before reaching catastrophic coverage. The Inflation Reduction Act 2022 eliminated the donut hole effective January 1, 2025.

Does the donut hole still exist in 2026?

No. The donut hole was eliminated effective January 1, 2025, by the Inflation Reduction Act of 2022. The current Part D benefit structure has three phases: deductible, initial coverage at 25% coinsurance until $2,000 out-of-pocket, then catastrophic coverage at $0 beneficiary cost-sharing.

What is the $2,000 out-of-pocket cap?

The $2,000 cap is the maximum annual amount a Medicare Part D beneficiary will pay out of pocket for covered prescription drugs starting in 2025. Once the beneficiary reaches $2,000 in qualifying out-of-pocket costs, they pay $0 for covered drugs for the rest of the calendar year. The cap is indexed annually and remains $2,000 for 2026.

How is the $2,000 cap calculated?

The $2,000 cap accumulates from the beneficiary's deductible payments, coinsurance, and copayments throughout the year. It includes payments by family, charitable organizations, and Low Income Subsidy. It does not include plan premiums, out-of-network drug costs, or drugs not on the plan formulary.

What is True Out-of-Pocket (TrOOP)?

TrOOP is the technical accounting concept that determines what counts toward Medicare Part D out-of-pocket thresholds. Effective 2025, TrOOP determines when a beneficiary reaches the $2,000 OOP cap. TrOOP includes beneficiary payments, family payments, charitable assistance, LIS payments, and (pre-2025) manufacturer discounts in the coverage gap.

What does NOT count toward TrOOP or the $2,000 OOP cap?

Plan premiums, drugs purchased at out-of-network pharmacies, drugs not on the plan formulary (unless exception granted), drugs excluded from Part D by statute (e.g., weight loss agents), over-the-counter drugs, payments from employer/group health plans, and certain third-party payments do not count toward TrOOP.

What is the Medicare Prescription Payment Plan (M3P)?

M3P, created by IRA Section 11202 effective January 1, 2025, lets Medicare Part D beneficiaries spread their out-of-pocket drug costs across monthly installments instead of paying at the pharmacy counter. M3P does not reduce total cost; it smooths cash flow. The maximum monthly bill is roughly $2,000 / remaining months in year.

How do I enroll in M3P?

Contact your Part D plan directly (number on member ID card) or call 1-800-MEDICARE. Enrollment is available year-round, not just during AEP. Enrollment is not retroactive : only costs incurred after enrollment can be spread. Once enrolled, the pharmacy collects $0 at the counter and the plan bills you monthly.

Should every Georgia beneficiary enroll in M3P?

No. M3P is most beneficial for beneficiaries with high-cost specialty drugs likely to hit $2,000 OOP early in the year, beneficiaries on fixed income who would struggle with a big single-month pharmacy bill, and beneficiaries who prefer predictable monthly billing. Beneficiaries with low drug costs may not benefit.

What about Medicare Low Income Subsidy (Extra Help)?

LIS Extra Help under Section 1860D-14 provides full or partial Part D cost-sharing assistance for low-income beneficiaries. Effective 2024 under IRA Section 11404, full LIS extends to 150% of federal poverty level (about $1,883 per month for individuals in 2026). LIS recipients pay $0 premium, $0 deductible, and minimal copayments well below the $2,000 cap.

How do I apply for LIS Extra Help in Georgia?

Apply through the Social Security Administration (1-800-772-1213, ssa.gov), online at ssa.gov/i1020, by mail (SSA Form i-1020), or in person at a Georgia SSA office. Approval is retroactive to the month of application. Georgia Department of Community Health screens for LIS as part of Medicare Savings Program applications.

What were the historical donut hole thresholds?

In 2010 the donut hole started at $2,830 in total drug spending (Initial Coverage Limit) and beneficiaries paid 100% in the gap until reaching $4,550 TrOOP for catastrophic coverage. By 2015 the gap thresholds and percentages had shifted, with brand drug beneficiary share at 45% in the gap. By 2020, BBA 2018 had reduced gap coinsurance to 25% throughout. By 2025 the gap was eliminated entirely.

What was the Coverage Gap Discount Program?

The Coverage Gap Discount Program, codified at Section 1860D-14A and added by ACA Section 3301, required brand drug manufacturers to provide a 50% discount (raised to 70% by BBA 2018) on drugs purchased by Medicare beneficiaries in the coverage gap. The CGDP was replaced effective 2025 by the Manufacturer Discount Program at Section 1860D-14C.

What is the Manufacturer Discount Program?

The Manufacturer Discount Program, codified at Section 1860D-14C and added by IRA Section 11201, replaces the Coverage Gap Discount Program effective 2025. It requires brand drug manufacturers to provide a 10% discount in the initial coverage phase and a 20% discount in the catastrophic phase for applicable beneficiaries.

Does the $2,000 cap apply to Medicare Part B drugs?

No. The $2,000 cap is Part D only. Medicare Part B covers drugs administered in physician offices, infusion centers, and certain outpatient settings, with separate cost-sharing (20% coinsurance after Part B deductible). Part B drug cost-sharing is supplemented by Medigap, MA-PD, or LIS for those eligible.

How does Medicare Drug Price Negotiation affect the coverage gap math?

Under IRA Section 11401, CMS negotiates Maximum Fair Prices for high-spend Part D drugs. The first 10 negotiated prices took effect January 1, 2026. Lower negotiated prices mean beneficiaries reach the $2,000 OOP cap with more total drug fills, and may not reach the cap at all if they take only negotiated drugs.

What are the first 10 negotiated drugs?

Eliquis, Jardiance, Xarelto, Januvia, Farxiga, Entresto, Enbrel, Imbruvica, Stelara, and Fiasp/NovoLog. Maximum Fair Prices reduce list prices by 38% to 79%. These drugs are commonly prescribed in Georgia for cardiovascular conditions, diabetes, rheumatoid arthritis, blood cancer, plaque psoriasis, and insulin therapy.

How do I know if my drug is covered by my plan?

Check the plan formulary (drug list), published annually by each Part D plan. Plans publish formularies online and provide print copies on request. Compare formularies during Annual Enrollment Period (October 15 to December 7) using the Medicare Plan Finder at medicare.gov or with help from GeorgiaCares (1-866-552-4464).

What if my drug is not on the formulary?

Request a coverage exception under Section 1860D-4(g) and 42 CFR 423.578. Your physician must support the request with medical justification. The plan has 72 hours to decide a standard exception or 24 hours expedited. If denied, you can appeal through the 5-level Medicare appeals process.

How does pharmacy network affect cost?

Plans contract with pharmacies as preferred (lowest cost-sharing) or standard (higher). Out-of-network pharmacy costs generally do not count toward the $2,000 OOP cap. In Georgia, preferred pharmacies often include chain retailers but specifics vary by plan. Check the network before filling.

Can I switch Part D plans during the year?

Generally no, except during Annual Enrollment Period (October 15 to December 7), Open Enrollment Period (January 1 to March 31 for Medicare Advantage), or under a Special Enrollment Period for qualifying circumstances. LIS recipients have a quarterly SEP under IRA effective 2024.

What is the Annual Enrollment Period?

The Annual Enrollment Period (AEP), also called Open Enrollment for Part D, runs from October 15 through December 7 each year. During AEP, Medicare beneficiaries can switch Part D plans, switch between PDP and MA-PD, switch MA plans, and join or drop Medicare Advantage. Changes take effect January 1.

What is the Medicare Advantage Open Enrollment Period?

The Medicare Advantage Open Enrollment Period (MA-OEP), runs from January 1 through March 31 each year. During MA-OEP, beneficiaries already enrolled in Medicare Advantage can switch to a different MA plan or return to Original Medicare with a standalone Part D plan. MA-OEP does not allow switching between PDP plans for Original Medicare beneficiaries.

How does the 2024 LIS Quarterly SEP work?

Effective 2024 under IRA Section 11404, LIS-eligible beneficiaries have a Special Enrollment Period in the first three quarters of each year (January-March, April-June, July-September) to enroll in or switch Part D plans. This gives low-income Georgia seniors more flexibility to find a plan with their drugs on formulary.

Where can I get free help comparing Georgia Part D plans?

GeorgiaCares is Georgia's State Health Insurance Assistance Program (SHIP) providing free one-on-one counseling on Medicare. Call 1-866-552-4464 to find local counselors. Counselors help compare plans, evaluate formularies, identify cost savings, apply for LIS Extra Help, and resolve plan disputes. :::

::: cta Georgia Medicare Part D Coverage Gap Resources

Free help understanding the Medicare donut hole history, the new $2,000 out-of-pocket cap, the Medicare Prescription Payment Plan (M3P), and your Part D options is available from these Georgia and federal organizations.

• GeorgiaCares (Georgia SHIP): 1-866-552-4464 : free one-on-one Part D plan counseling
• Medicare: 1-800-MEDICARE (1-800-633-4227) : Part D enrollment, M3P questions
• Social Security Administration: 1-800-772-1213 : Low Income Subsidy applications
• Georgia Department of Community Health Medicaid Member Services: 1-866-211-0950 : LIS coordination for dual eligibles
• Georgia Office of Insurance Commissioner: 1-800-656-2298 : plan complaints
• AARP Georgia: 1-866-295-7283 : senior advocacy
• Medicare Rights Center: 1-800-333-4114 : national helpline for Part D appeals
• Center for Medicare Advocacy: 1-860-456-7790 : legal assistance for Medicare disputes
• Justice in Aging: 202-289-6976 : national legal advocacy for low-income seniors
• Medicare Beneficiary Ombudsman: assistance with unresolved Medicare complaints
• Eldercare Locator: 1-800-677-1116 : connects to local Georgia Area Agencies on Aging
• 211 Georgia: dial 211 : referrals to local senior assistance
• Atlanta Legal Aid Senior Citizens Law Project: 404-377-0701
• Georgia Legal Services Program: 1-800-498-9469 : legal aid statewide outside Atlanta metro
• Palmetto GBA Georgia MAC: 1-855-696-0705 : Georgia Medicare Administrative Contractor
• CMS Region IV Office (Atlanta): regional CMS office for Georgia Part D
• Georgia Department of Human Services Division of Aging: aging.georgia.gov : state aging services
• Brevy: brevy.com : comprehensive eldercare guides including Part D, Medicare Advantage, Medigap, and Low Income Subsidy resources for Georgia families :::

Disclaimer: This guide is for informational purposes only and does not constitute legal, financial, medical, or insurance advice. Medicare Part D rules, the $2,000 out-of-pocket cap, the Medicare Prescription Payment Plan (M3P), Low Income Subsidy thresholds, and plan-specific formularies change annually. Federal authorities cited include Section 1860D of the Social Security Act, the Affordable Care Act of 2010, the Bipartisan Budget Act of 2018, the Inflation Reduction Act of 2022, 42 CFR Part 423, and CMS guidance current as of May 2026. For your specific situation, contact GeorgiaCares (1-866-552-4464) for free counseling or Medicare (1-800-MEDICARE) directly.