The Medicare Part D coverage gap (donut hole) has been effectively eliminated thanks to the Inflation Reduction Act. Starting in 2025 and continuing in 2026, Medicare beneficiaries pay no more than $2,000 out of pocket for prescription drugs in a calendar year. This guide explains the current benefit structure, how the $2,000 cap works, and what has changed from the old donut hole system.

Key Facts

The traditional Medicare donut hole has been eliminated as of 2025 (continuing in 2026)
The new annual out-of-pocket cap is $2,000 for all Medicare Part D beneficiaries
After reaching $2,000, you pay $0 for covered drugs for the rest of the calendar year
The Medicare Prescription Payment Plan lets you spread the $2,000 in equal monthly installments
Drug manufacturers now pay 20% of brand-name drug costs in the coverage gap phase
The Part D benefit phases are now: deductible, initial coverage, and catastrophic coverage ($0 after $2,000)

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Frequently Asked Questions

Is the Medicare donut hole gone in 2026?

Effectively, yes. While the coverage phases technically still exist, the $2,000 annual out-of-pocket cap means you never pay more than $2,000 total for covered drugs in a year. The old donut hole could cost thousands in the gap. Now, once you reach $2,000, your plan covers everything at 100% for the rest of the year.

How does the $2,000 Medicare Part D cap work?

All your out-of-pocket spending on covered Part D drugs (copays, coinsurance, deductible payments) counts toward the $2,000 cap. Once your true out-of-pocket costs reach $2,000, you enter catastrophic coverage where your plan pays 100%. The Medicare Prescription Payment Plan lets you pay the $2,000 in equal monthly installments instead of all at once.

What is the Medicare Prescription Payment Plan?

This optional program lets you spread your Part D out-of-pocket drug costs across the year in predictable monthly payments, similar to a payment plan. Instead of paying large copays at the pharmacy, you make equal monthly payments to your Part D plan. You can opt in at any time by contacting your plan.

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