If you've had Medicare Part D for a while, you remember the coverage gap, the dreaded donut hole where your drug costs suddenly jumped partway through the year. Good news on this one: it's gone. Since 2025 there's a firm annual limit on what you can pay out of pocket for covered Part D drugs, and in 2026 that limit is $2,100.

In This Guide

What Was the Medicare Part D Coverage Gap?

For years, a Part D drug plan worked in stages. You paid a deductible, then you and your plan shared costs for a while, and then you hit a stretch where your share of the price shot up. That middle stretch was the coverage gap, and just about everyone called it the donut hole.

The name captured the shape of it. You had decent coverage at the start of the year, then you fell into a hole where drugs got a lot more expensive, then you climbed back out the far side into catastrophic coverage once you'd spent enough. For someone on a couple of pricey brand-name medications, the donut hole could turn a manageable monthly copay into a bill of several hundred dollars, usually right around summer or fall.

So for a long time, "when do I hit the donut hole" was one of the most common questions Part D enrollees asked. That question doesn't really apply anymore.

Where the Medicare Part D Coverage Gap Went in 2026

The gap closed because of the Inflation Reduction Act, the 2022 law that reworked how Part D drug costs are shared. Its headline change for people at the pharmacy counter is a hard yearly cap on out-of-pocket spending for covered Part D drugs. Reach the cap, and you're done paying for covered drugs for the rest of the calendar year.

That cap first took effect in 2025 at $2,000. CMS sets the figure for each year, and for 2026 it's $2,100, as specified in the CY 2026 Rate Announcement. Once the cap exists and applies all year, there's no separate stretch where your costs spike, which is why the donut hole is described as eliminated rather than just shrunk. The old three-tier "gap" is folded into a cleaner structure.

If your total drug bills are modest, you may never come close to $2,100 in a year and won't notice the cap at all. If you take expensive medications, though, the cap is the number that matters most, because it's the ceiling on your year.

And if even the capped amount stretches your budget, two federal programs can help. Medicare Extra Help, the Part D Low-Income Subsidy, lowers what people with limited income and resources pay for their Part D drugs. The Medicare Prescription Payment Plan doesn't lower your total, but it lets you spread your out-of-pocket costs into monthly payments across the year instead of paying it all at the pharmacy counter.

The Three Coverage Phases and What You Pay

Part D still moves through phases in 2026, just not the four-part structure with a donut hole in the middle. There are three phases now, and here's what each one costs you.

Phase What you pay When it ends
Deductible The full negotiated price, up to your plan's deductible (no more than $615 in 2026; some plans set it lower or at $0) Once you've paid the deductible
Initial coverage 25% of the cost as coinsurance on your covered generic and brand-name drugs Once your out-of-pocket spending on covered drugs reaches $2,100
Catastrophic $0 for covered Part D drugs The rest of the calendar year

So the path is straightforward. You clear the deductible (if your plan has one), you pay a quarter of the cost of your covered drugs for a while, and once your own spending on those drugs adds up to $2,100, covered drugs are free for the rest of the year. The cap is measured by what you actually spend out of pocket on covered Part D drugs, so it's the money leaving your wallet at the pharmacy that moves you toward it.

One thing worth knowing: plans differ in the details. A plan can set a lower deductible, or none, and can charge flat copays instead of straight 25% coinsurance in the initial phase. The phases and the $2,100 cap are the federal frame; your specific plan fills in the rest.

What the Manufacturer Discount Program Does

When the donut hole existed, drug manufacturers kicked in a discount to soften it, through something called the Coverage Gap Discount Program. With the gap gone, that program ended. In its place, effective January 2025, is the Manufacturer Discount Program.

On the drugs the program covers, the manufacturer typically pays a 10% discount while you're in the initial coverage phase and typically 20% once you reach catastrophic coverage. There's no manufacturer discount at all during the deductible phase. Which drugs qualify comes down to how they were approved rather than what your plan calls them: drugs cleared under a new drug application count, and so do biological products licensed under the Public Health Service Act, which includes biosimilars. Ordinary generics approved as copies of an existing drug don't. And in 2026, drugs Medicare has selected for price negotiation are carved out of the program while their negotiated prices are in effect.

There are two wrinkles the Centers for Medicare & Medicaid Services (CMS) is clear about, and they matter for anyone counting on that discount. First, the discount comes off what your Part D plan owes on the negotiated price, not off your share, so in most cases it doesn't change the 25% coinsurance or copay you hand over at the counter. The one exception: if your cost sharing would come out higher than the discounted price, you pay the lower of the two. Second, manufacturer discounts don't count toward your $2,100 out-of-pocket total; only what you actually pay, or what certain third parties pay on your behalf, moves you toward the cap. So the program pulls real money out of what a drug costs, but it lands on your plan's side of the ledger. In most cases it neither shrinks your bill nor speeds you toward the point where covered drugs become free.

Frequently Asked Questions

Is the Medicare Part D donut hole gone in 2026?

Yes, for practical purposes. The Inflation Reduction Act replaced the old coverage gap with a single annual out-of-pocket cap on covered Part D drugs. There's no longer a middle stretch of the year where your drug costs suddenly spike, which is what the donut hole was.

What's the most I'll pay for prescriptions under Part D in 2026?

Your out-of-pocket spending on covered Part D drugs is capped at $2,100 for 2026. Once you reach it, you pay $0 for covered drugs for the rest of the calendar year. The cap counts what you actually pay at the pharmacy for covered drugs.

What happened to the coverage-gap manufacturer discount?

The Coverage Gap Discount Program ended when the gap did. The Manufacturer Discount Program replaced it in 2025. On the brand-name drugs and biologics it covers, the manufacturer typically pays a 10% discount in the initial coverage phase and 20% in catastrophic coverage. That discount lands on your plan's share of the cost rather than yours in most cases, and it doesn't count toward your $2,100 cap.

Learn More

MedicareHow Medicare Part D WorksMedicare Part D in 2026: a $2,100 out-of-pocket cap, no donut hole, three benefit phases, the $615 deductible, premiums, the late penalty, and Extra Help. MedicareThe Medicare Part D Out-of-Pocket Cap, ExplainedYes, there's now a Medicare Part D out-of-pocket cap on covered drugs. It was $2,000 in 2025 and $2,100 in 2026. Here's how the limit works and when you hit it. MedicareHow the Medicare Prescription Payment Plan WorksThe Medicare Prescription Payment Plan (M3P) spreads your 2026 Part D drug costs into monthly bills. It smooths the timing but does not lower what you pay. MedicareMedicare Extra Help: The Part D Low-Income SubsidyMedicare Extra Help can cut Part D drug costs to a few dollars a prescription. See 2026 income and resource limits, what it pays, and how to apply.

Find personalized help understanding what your Part D drugs will cost in 2026 at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.

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