What is the Medicare donut hole?

The Medicare Part D "donut hole" no longer exists. The coverage gap was eliminated on January 1, 2025 by the Inflation Reduction Act, which replaced the old four-stage drug benefit with a simpler design and a hard cap on what you pay out of pocket.

What replaced the donut hole

Part D now has three stages:

1. Deductible stage. You pay the full negotiated price until you meet your plan’s deductible. In 2026 no plan may charge more than $615, and in 2027 the maximum rises to $700. Many plans charge less, and some charge nothing at all.
2. Initial coverage stage. You pay a copay or coinsurance for each prescription and your plan pays the rest.
3. Catastrophic stage. Once your out-of-pocket spending on covered drugs reaches the annual cap, you pay $0 for covered Part D drugs for the rest of the year. That cap is $2,100 in 2026 and $2,400 in 2027.

What this means for you

• There is no longer a stage where your share of the cost suddenly jumps.
• Your out-of-pocket drug spending is capped for the year, no matter how expensive your prescriptions are.
• Only what you or someone on your behalf pays for covered drugs counts toward the cap. Your monthly premium does not count.
• You can spread your out-of-pocket costs across the year in monthly installments through the Medicare Prescription Payment Plan instead of paying a large amount at the pharmacy counter.
• The cap applies per year, so your spending resets each January 1.

Why you may still hear the term

The donut hole ran from 2006 through 2024, so a lot of older articles, plan documents and conversations still refer to it. If a plan document you are reading describes a coverage gap, check the plan year on the cover: for 2026 and 2027 plans, that stage does not apply.

Talk to a licensed iHealthAgents advisor

We can compare every Part D plan available where you live and show you what your own prescriptions would cost under each one.

Book a time with a licensed advisor, or call Illinois 312-726-6565 or Texas 972-666-0578.

This article is for educational purposes only. Figures shown are the 2026 and 2027 Medicare Part D amounts published by CMS: a maximum deductible of $615 in 2026 and $700 in 2027, and an annual out-of-pocket cap of $2,100 in 2026 and $2,400 in 2027.