The Medicare Part D out-of-pocket cap is real, and it puts a yearly ceiling on what you pay for covered prescription drugs. It started in 2025, and once your spending reaches the limit, you won't have to pay out of pocket for covered Part D drugs for the rest of the calendar year. It's one of the biggest changes to Medicare drug coverage in years. Today's Part D benefit, as CMS and Medicare.gov describe it, has no separate coverage-gap stage, the one people called the donut hole.

In This Guide

Is There a Cap on Part D Drug Costs?

The short answer? Yes. There's an annual cap on what you pay out of pocket for covered Part D drugs. It came out of the Inflation Reduction Act and started with a $2,000 cap in 2025.

The number most people remember is $2,000, and that was right for 2025, the cap's first year. But the cap is indexed, which means CMS adjusts it each year based on the increase in average spending on covered Part D drugs. So for 2026, the annual out-of-pocket limit is $2,100. If you come across an older article quoting $2,000, it isn't wrong. It's just last year's figure. And if you're picking a plan for 2027, the number to know is $2,400, the out-of-pocket threshold CMS set for that year.

How the Medicare Part D Out-of-Pocket Cap Works in 2026

Think of it as one running total across the calendar year. Once you're past any plan deductible, you generally pay 25% of the cost of your covered generic and brand-name drugs, and every out-of-pocket dollar you spend on covered Part D drugs adds to your total. Plan deductibles vary, but a plan's 2027 deductible can't be higher than $700, the standard deductible CMS set for that year, up from $615 in 2026.

When that total reaches $2,100 in 2026, you cross into what Medicare calls the catastrophic coverage stage. From that point on, you pay $0 for your covered Part D drugs for the rest of the calendar year. So if your prescriptions are expensive enough that your share adds up to the cap by, say, late summer, the rest of your covered fills for that year cost you nothing.

The counter resets every January 1. The cap is a yearly ceiling, not a once-in-a-lifetime one, so a new total starts fresh each year. In 2027, that new total runs toward a $2,400 cap, and once you reach it, CMS says you continue to pay no cost sharing for covered Part D drugs for the rest of that year.

One thing the cap doesn't stop is your monthly plan premium. Medicare.gov describes the premium as an amount you pay for coverage whether you get covered drugs or not, so it's still owed after you reach the cap, and so is any Part D late enrollment penalty.

What Counts Toward the Medicare Part D Out-of-Pocket Cap

Out-of-pocket spending on covered Part D drugs is what counts toward the cap, meaning the medications on your plan's formulary that your Part D coverage pays a share of. It doesn't all have to be your own money: Medicare.gov says certain payments made on your behalf, like through the Extra Help program, count toward the $2,100, and State Pharmaceutical Assistance Program (SPAP) contributions may count too. A drug your plan doesn't cover won't move you toward the $2,100 limit in 2026, which is why it pays to know your formulary before the year starts. If something you take isn't on it, raise it with your plan or your doctor early, since a covered alternative may exist and switching could change how quickly you reach the cap.

What Happened to the Donut Hole

If you've been on Medicare for a while, you probably remember the coverage gap, the stage nicknamed the donut hole. That stage is not part of the current design. CMS's account of the CY 2026 defined standard Part D benefit has three phases, an annual deductible, initial coverage, and catastrophic, and Medicare.gov likewise describes drug plans as generally having three stages. Neither describes a separate coverage-gap phase. What you have instead is an annual out-of-pocket cap, and once you reach it, you won't have to pay out of pocket for covered Part D drugs for the rest of the calendar year.

For the fuller history of how the gap worked and where it went, we walk through it in our guide to the Part D coverage gap.

Frequently Asked Questions

Is the Part D cap $2,000 or $2,100?

Both numbers are real; they just belong to different years. The cap was $2,000 in 2025, its first year. Because it's indexed to the increase in average spending on covered Part D drugs, the 2026 out-of-pocket limit is $2,100. For 2027, CMS has set it at $2,400.

What happens after I hit the cap?

You move into Medicare's catastrophic coverage stage and pay $0 for your covered Part D drugs for the rest of the calendar year. The limit then resets the following January.

Does this mean the donut hole is gone?

Effectively, yes. The 2026 Part D benefit has three stages, deductible, initial coverage, and catastrophic, and neither CMS nor Medicare.gov describes a separate coverage-gap stage. What you have instead is an annual cap on out-of-pocket spending for covered Part D drugs.

Does the cap cover every medication I take?

The cap tracks your out-of-pocket spending on covered Part D drugs, meaning the ones on your plan's formulary. If you're not sure whether a specific drug is covered, check your plan's formulary or ask your plan directly before you fill it.

Learn More

MedicareHow Medicare Part D WorksMedicare Part D in 2026 and 2027: the $2,100 out-of-pocket cap rising to $2,400, the $615 and $700 deductibles, premiums, the late penalty, and Extra Help. MedicareThe Medicare Part D Coverage Gap: Where the Donut Hole WentThe Medicare Part D coverage gap, the donut hole, is effectively gone in 2026. A $2,100 out-of-pocket cap now limits what you pay for covered drugs. Here's how. MedicareHow Much Does Medicare Cost?How much does Medicare cost in 2026? Part A, B, C, and D premiums, deductibles, and coinsurance, plus IRMAA and ways to lower your Medicare costs. MedicareThe insulin cap: the other Part D cost limitYes. Under the Inflation Reduction Act, Medicare caps each covered insulin at $35 for a one-month supply, and the Part D deductible doesn't apply. Here's how. 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 your Medicare Part D drug costs 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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