What Changed: The Donut Hole is Closed
The Inflation Reduction Act of 2022 phased out the Medicare Part D coverage gap. Starting in 2025 (and continuing in 2026), once you spend $2,000 out-of-pocket on covered drugs, you pay $0 for the rest of the year. This eliminates the 'donut hole' that previously required beneficiaries to pay 25% of drug costs in a gap phase.
If you previously hit the coverage gap and faced higher drug costs, you'll benefit significantly from the $2,000 cap. People who take expensive specialty or brand-name drugs will see the most savings.
How Part D Cost Phases Work in 2026
Part D still has phases, but the catastrophic phase now kicks in at $2,000 OOP:
| Phase | Your Spending Threshold | What You Pay |
|---|---|---|
| Deductible Phase | First $615 (if plan has deductible) | 100% of drug costs |
| Initial Coverage Phase | Up to $2,000 total OOP | Copays/coinsurance per tier |
| Catastrophic Coverage | After $2,000 OOP | $0 for covered drugs |
Medicare Prescription Payment Plan
A new option for 2025 and 2026 allows you to spread your Part D out-of-pocket costs across monthly payments throughout the year, rather than paying large amounts upfront when you fill expensive prescriptions. This is especially helpful for people who take specialty drugs early in the year.
- Opt in through your Part D plan
- Your plan pays the pharmacy upfront
- You repay the plan in equal monthly installments
- No interest charged