Medicare Part D and the 'Donut Hole' in 2026: What Actually Changed

June 28, 2026 · 7 min read

By Kaleb Boedecker · Licensed Independent Insurance Agent (NPN 20642452) · June 28, 2026 · 7 min read

The Medicare donut hole no longer exists. The Inflation Reduction Act permanently eliminated the Part D coverage gap on January 1, 2025, and replaced it with a hard ceiling on what you pay. In 2026, once your out-of-pocket drug spending hits $2,100, your plan covers your drugs at 100% for the rest of the year.

I still get calls from people bracing for the donut hole like it's a storm on the horizon. It was real, it was brutal, and for two decades it caught seniors off guard every fall. But it's gone now. Here's what Part D actually looks like today.

The numbers to anchor to first

Part D in 2026 runs on a few figures worth writing down. Your deductible can be up to $615, though many plans set it lower. After the deductible you pay about 25% coinsurance on covered drugs. Once your own out-of-pocket spending reaches the $2,100 cap, you pay $0 for covered drugs the rest of the year — premiums don't count toward that cap. And if you go without creditable drug coverage, the late-enrollment penalty is 1% of the $38.99 national base premium for every full month you waited, added to your premium for life. Five numbers. That's the whole shape of it.

Myth: the donut hole will eat you alive in retirement

This is the fear I spend the most time un-teaching, so let me say it flat out. The donut hole is dead. It is not smaller, not reformed, not "improved" — it was permanently eliminated on January 1, 2025, and there is no gap stage in Part D anymore.

Here's why the old version terrified people. The coverage gap was a stretch where, after your drug spending crossed a threshold, your share of costs jumped and you were stuck paying a much larger slice until you spent your way out the other side. People on expensive medications would sail along fine through spring, then get blindsided by a pharmacy bill three times what they'd been paying. I watched clients ration insulin because of it.

That mechanism is gone. In its place is the $2,100 out-of-pocket maximum — a real ceiling that didn't exist before. The most you'll pay out of pocket for covered drugs in 2026 is that number, full stop. For someone on a pricey specialty drug, this is one of the biggest improvements Medicare has seen in years. The dread is a holdover from a system that no longer applies.

The three stages of Part D in 2026

Part D used to have four stages, including the gap. Now there are three, and they run in order.

Stage one: the deductible. You pay full price for your drugs until you meet your plan's deductible, which can be up to $615 in 2026. Some plans set it lower or waive it on certain tiers.

Stage two: initial coverage. After the deductible, you pay roughly 25% coinsurance and your plan covers the rest. You stay here until your out-of-pocket spending adds up to the cap.

Stage three: the cap. Once you hit $2,100 in out-of-pocket spending on covered drugs, you're done. Your plan pays 100% of covered drugs for the remainder of the calendar year. There is no fourth stage, because there is no gap.

Here's how the old structure compares to what you've got now.

Feature	Old Part D (through 2024)	Part D in 2026
Coverage gap ("donut hole")	Yes — costs jumped mid-year	Gone — eliminated Jan 1, 2025
Out-of-pocket ceiling	No hard cap on your spending	Hard $2,100 cap
Number of stages	Four	Three
Monthly payment option	No	Yes — the M3P
Annual deductible (max)	Lower, but gap loomed after	Up to $615, then a real ceiling

You can spread the cost out now, too

One change almost nobody knows about: the Medicare Prescription Payment Plan, or M3P, available since 2025. It lets you spread your out-of-pocket drug costs into monthly payments across the year instead of paying it all at once at the pharmacy counter.

This matters most if you hit a big bill early. Say a January prescription would cost you several hundred dollars at the register. Under the M3P, you don't pay it all that day — the plan bills you in monthly installments instead. You're not paying more, you're just smoothing it out so a January refill doesn't blow up your budget. It's opt-in, so you have to ask for it. Worth raising with anyone whose drug costs front-load early in the year.

The penalty that follows you for life

The donut hole is gone, but one Part D trap is very much alive: the late-enrollment penalty. If you go without creditable drug coverage — meaning coverage at least as good as standard Part D — for any stretch after you're first eligible, Medicare adds a permanent surcharge when you finally sign up.

The math: 1% of the $38.99 national base beneficiary premium for each full month you went without. Wait 20 months and that's 20% tacked onto your premium, recalculated each year, for as long as you have Part D. People skip a drug plan because they aren't taking anything yet, then get penalized for life when they need one. If you're enrolling now, the timing of your drug plan matters as much as picking the plan itself — something covered in the broader new-to-Medicare walkthrough.

How to actually pick a plan: read the formulary

Here's where most people go wrong. They shop Part D on premium alone. The premium is the smallest part of the picture. What matters is the formulary — the plan's list of covered drugs and the tier each one sits on. The same medication can be a cheap tier on one plan and an expensive tier on another, and two plans with identical premiums can cost you hundreds of dollars apart once your actual prescriptions are run through them.

So that's the first thing I do. I take your full prescription list and run it against each plan's formulary, drug by drug, to make sure a medication you take every month doesn't land on a bad tier. That work is free — the carrier pays me, not you, and your rate is identical to going direct. There's no reason not to have someone check it. Whether your drug coverage is a standalone plan or built into something larger depends on your setup, which ties into whether your drug plan is bundled or standalone. For a fuller look at how this works, see my Medicare Part D plan guidance.

Three things to know about Part D in 2026

1. The donut hole is gone. A hard $2,100 out-of-pocket cap replaced it, so one expensive year can't run away from you anymore.
2. The late penalty is permanent. Skip creditable drug coverage when you're first eligible and you'll pay a surcharge for life, even if you weren't on any medication.
3. The formulary decides your real cost. Shop your actual prescriptions against each plan's tiers, because premium alone tells you almost nothing.

Why does the formulary check matter so much? Because the wrong agent shops on premium, signs you up, and moves on — and you find out in March that your maintenance drug is a tier-five specialty cost on the cheap-looking plan. That's why an agent checks your formulary first, and it's the half hour up front that saves you all year, here in Texas and in the other states I'm licensed in.

What I'd tell my own family

If a relative called me about Part D today, the advice would be simple: stop worrying about the donut hole and start with your pill bottles. List every drug, every dose. Then run that list against the plans and pick the one where your actual medications cost the least over a full year — not the one with the lowest sticker premium. And don't ever skip a drug plan just because you're healthy right now; that's how the lifelong penalty sneaks up on people. One more thing I tell everyone: don't ever pay the first bill you get. Always call first. I'm a phone call away at 281-607-4053.

Frequently asked questions

How does the Part D out-of-pocket cap work in 2026?

Once your own out-of-pocket spending on covered drugs reaches $2,100, your plan pays 100% of covered drugs for the rest of the calendar year. Your monthly premiums do not count toward that $2,100 — only what you actually spend on covered medications does.

What happened to the Medicare donut hole?

It was permanently eliminated on January 1, 2025 by the Inflation Reduction Act. The coverage gap stage no longer exists. In its place is a hard $2,100 out-of-pocket cap, so there's no longer a mid-year stretch where your drug costs suddenly spike.

When does the Part D late-enrollment penalty apply?

It applies if you go without creditable drug coverage after you're first eligible. The penalty is 1% of the $38.99 national base premium for each full month you waited, added to your premium permanently. It applies even if you weren't taking any medications during the gap.

Can I spread my Part D drug costs into monthly payments?

Yes. The Medicare Prescription Payment Plan, available since 2025, lets you pay your out-of-pocket drug costs in monthly installments instead of all at once at the pharmacy. You don't pay more overall — it just smooths a big early-year bill across the year. You have to opt in to use it.

Does every Part D plan cover my prescriptions?

No. Each plan has its own formulary and tier structure, so a drug that's cheap on one plan can be costly on another. That's why you should run your exact prescription list against each plan before enrolling rather than shopping on premium alone, which can hide hundreds in tier costs.