Medicare Part D donut hole in 2026 — what changed (and didn't)
The Inflation Reduction Act eliminated the traditional Part D 'donut hole' starting in 2025 and capped total annual out-of-pocket drug costs at $2,000 (rising to $2,100 in 2026). This is the biggest change to Medicare drug coverage in 20 years. Here's what it actually means for your costs.
Key takeaways
- 2026 OOP cap: Total Part D out-of-pocket capped at $2,100/year — no exceptions, no donut hole.
- Old donut hole (eliminated): Used to be a coverage gap where you paid 25% of drug costs. Gone.
- New structure: Deductible phase → Initial coverage (25% you, 75% plan) → Catastrophic phase ($0 cost-sharing once you hit $2,100).
- Smoothing option: You can spread your $2,100 OOP across the year as monthly payments instead of paying upfront.
What the donut hole used to be
Before 2025, Part D had a confusing 4-phase structure:
- Phase 1: Deductible — you paid 100% until you hit your plan's deductible ($545 in 2024).
- Phase 2: Initial coverage — you paid copays/coinsurance until total drug costs hit $5,030.
- Phase 3: Coverage gap ("donut hole") — you paid 25% of drug costs (down from 100% in the original 2006 design).
- Phase 4: Catastrophic coverage — you paid 5% of drug costs after total OOP hit $8,000+.
The donut hole created sticker shock for people on expensive medications. A $4,000/year specialty drug could cost you $1,000+ during the gap phase — even though your plan was "covering" it.
What the IRA changed (2025 and 2026)
The Inflation Reduction Act (IRA) restructured Part D in two phases:
2025: Annual OOP cap at $2,000. Donut hole eliminated. Smoothing option introduced.
2026: Annual OOP cap rises to $2,100 (indexed annually thereafter). Same structure.
The new structure is much simpler:
- Phase 1: Deductible — you pay 100% until you hit your plan's deductible (max $590 in 2026).
- Phase 2: Initial coverage — you pay 25%, your plan pays 75%, until your TOTAL out-of-pocket hits $2,100.
- Phase 3: Catastrophic coverage — you pay $0 for the rest of the year. Plan covers everything.
The new smoothing option (Medicare Prescription Payment Plan)
If you can't afford to pay $2,100 upfront for an expensive medication, you can opt into Medicare's Prescription Payment Plan:
- Spread your annual OOP cap as monthly payments.
- Maximum monthly payment in 2026 is $175 (i.e., $2,100 ÷ 12 months).
- Pharmacies bill your plan directly; the plan invoices you monthly.
- Catch: Once you opt in, you can't easily opt out for the rest of the year. And the math doesn't favor everyone — if you'd only spend $400 in OOP for the year, you don't want to be on a $175/month plan.
Who benefits the most from the IRA Part D changes
Beneficiaries who benefit most:
- People on multiple expensive medications (5+ brand-name drugs, including specialty drugs).
- People who used to hit the donut hole early in the year (now there's no donut hole).
- Cancer patients on oral oncology drugs (many cost $10,000+/year retail).
- Auto-immune and biologics patients (Humira, Enbrel, etc.).
Less impact for: Beneficiaries on only generics or low-cost meds whose annual OOP was already under $2,100. They see the simpler structure but the hard cap doesn't change their math.
Common questions
Is the Medicare Part D donut hole still a thing in 2026?
What is the Part D out-of-pocket cap in 2026?
Can I spread my $2,000 out-of-pocket over the year?
Do all drugs count toward the $2,000 cap?
Questions about your specific situation?
A licensed SilverEdge advisor can walk through your exact options in 15 minutes by phone — free, no pressure.