Now That the Medicare Donut Hole Is Gone, What Is in Its Place?

For many years, people on Medicare dreaded the “donut hole.” That was a phase in Medicare Part D drug coverage where your costs could spike partway through the year. You might have paid a regular copay early in the year, only to find yourself paying a much larger share of your prescription costs once you hit that gap.

In 2025, Medicare removed the traditional donut hole and replaced it with a system designed to limit how much you pay out of pocket for prescription drugs each year. In 2026, that cap is set at $2,100 for covered drugs provided by a Medicare Part D plan or a Medicare Advantage plan that includes drug coverage. Once you reach that amount in out-of-pocket costs for covered medications, your plan pays 100 percent of the costs of covered prescriptions for the rest of the calendar year. This cap includes what you pay for your deductible, copays, and coinsurance for covered drugs, but does not include your monthly Part D premium or drugs not covered by your plan.

Here’s how the structure looks now:

Your Part D Costs Still Have Phases

Even though the donut hole name is gone, Part D plans still work in stages:

• You pay toward your deductible first. For 2026, the maximum deductible that plans can charge is $615.

• After the deductible, you pay your share of the costs through regular copays or coinsurance. Your plan pays the rest.

• All of what you spend on your deductible, copays, and coinsurance for covered drugs counts toward your $2,100 annual out-of-pocket cap.

• Once you’ve reached $2,100, your Part D plan covers 100 percent of covered prescriptions for the rest of the year.

This new cap replaced the old structure in which you faced higher out-of-pocket spending once you and your plan reached a certain total spent amount, and then you continued paying coinsurance until reaching catastrophic coverage. The change was part of broader updates to make drug costs more predictable and less burdensome for people on Medicare.

Why This Matters

For most people, this is a positive shift. When the donut hole was still part of the system, reaching that gap could mean paying a much larger share of your prescription costs for a time before getting relief. Now, you know that once you pay up to $2,100 in a year for covered drugs, your costs drop to zero for the rest of the year.

That makes it easier to plan and budget for medication expenses, even if you have multiple prescriptions or high-cost drugs.

What It Doesn’t Include

It’s important to know that the cap applies only to drugs your Part D plan covers. It doesn’t count toward:

• Your monthly Part D premium

• Drugs that Medicare doesn’t cover at all

• Medications covered under Medicare Part B, such as certain infused drugs given in a doctor’s office or clinic

These things are handled differently by Medicare and may have separate costs.

Bottom Line

The donut hole is a thing of the past. In its place is a clear and predictable out-of-pocket limit that makes prescription costs more affordable and easier to manage. If you’re not sure where you stand with your current drug plan, or if you want to see if another plan might save you money before reaching that cap, we can help you review your options.