Core Insurance Solutions
    By Core Insurance SolutionsOctober 10, 2026
    Medicare Donut Hole in 2026: $2,100 Cap, Then $0 on Covered Drugs

    Medicare Donut Hole in 2026: $2,100 Cap, Then $0 on Covered Drugs

    The Medicare donut hole no longer functions the way it used to. As of 2026, Part D runs on a three-stage model, and once you hit $2,100 in out-of-pocket drug costs for the year, your covered Part D drugs cost you nothing for the rest of the year. Medicare, the Centers for Medicare & Medicaid Services, and the Social Security Administration all point to this same redesigned structure.

    TL;DR:

    • The deductible cannot exceed $615 in 2026, and initial coverage typically requires 25% coinsurance; some plans waive the deductible entirely.
    • Your total toward the annual limit can include qualifying payments made for you, such as Extra Help subsidies and certain manufacturer payments.
    • Drug tiers, prior authorization, and pharmacy networks can change checkout costs, so compare each plan’s formulary and use preferred pharmacies when possible.
    • People enrolled in Medicaid or Supplemental Security Income may qualify automatically for Extra Help, which can remove premiums and deductibles and lower prescription copays.
    • The Medicare Prescription Payment Plan spreads out of pocket bills across the year, but it does not reduce the total amount you owe.
    Core Insurance Solutionscoreforseniors.comFind a Part D Plan That FitsCore Insurance Solutions compares Medicare options around your health needs and can help you minimize prescription costs.Explore Medicare guidance

    Table of Contents

    1. How Part D works now: deductible, initial coverage, catastrophic

    Part D coverage moves through three predictable stages instead of the old gap phase. Understanding where you sit in this sequence tells you what to expect at the pharmacy counter.

    • Deductible stage: you pay out of pocket up to your plan’s deductible, which cannot exceed $615 in 2026; some plans waive this stage entirely.
    • Initial coverage stage: after the deductible, you typically pay 25% coinsurance on covered drugs, with the rest covered by your plan and manufacturer discounts.
    • Catastrophic coverage: once your out-of-pocket spending reaches the annual threshold, covered Part D drugs cost you $0 for the remainder of the year.

    What you actually pay at the pharmacy depends heavily on plan details beyond these stage percentages. A drug’s tier placement, whether it requires prior authorization, and whether your pharmacy is in your plan’s preferred network can all change the price you see at checkout. Two people with the same diagnosis and the same deductible can end up paying noticeably different amounts simply because one filled a prescription at a preferred pharmacy and the other didn’t. Before you assume a medication will be expensive, check your plan’s formulary and tier list. Our Part D explainer walks through formulary tiers and penalties in more detail if you want the fuller picture.

    2. What changed in 2025-2026: why the “donut hole” label no longer fits

    The phrase “donut hole” described a mid-year coverage gap that existed for years under the old Part D structure. That gap is gone. The Inflation Reduction Act drove a CMS-led redesign that replaced the old four-phase system with the three-stage model now in place for 2026.

    A few forces made this possible:

    • Manufacturer discounts and CMS payments now help cover costs that used to fall on beneficiaries during the gap phase.
    • Negotiated prices on select high-cost drugs reduce what plans and patients pay before coinsurance even applies, a shift we cover in our piece on 2026 negotiated drug prices.
    • CMS designed the structure specifically to remove unpredictability, replacing the old gap with a steady path toward an annual cap.

    Practically, this means you no longer drop into a separate, more expensive phase mid-year. You move through deductible, then coinsurance, then catastrophic coverage, with your spending counting toward one clear annual limit the whole way.

    3. Costs to expect in 2026: the numbers that matter

    In 2026, your Part D deductible can be no more than $615, your coinsurance during initial coverage is 25%, and once your out-of-pocket spending hits $2,100, covered drugs cost you $0 for the rest of the year. That $2,100 figure is the number to track all year, since it determines when your costs stop entirely.

    Not every dollar applied toward that threshold has to come from your own pocket. Payments made on your behalf, including Extra Help subsidies and certain manufacturer payments that CMS counts under program rules, also count toward your $2,100 total. That’s one reason it pays to keep your pharmacy receipts and plan statements together rather than relying on memory.

    Here’s how this plays out with a simple illustrative example. Say a beneficiary needs a medication that costs $3,000 total early in the year. Combined with the deductible, that’s about $1,211 out of pocket, still short of the $2,100 threshold. A second expensive fill later in the year would likely push the beneficiary past that threshold and into catastrophic coverage, where remaining 2026 drug costs would be $0.

    • Deductible: up to $615.
    • Initial coverage coinsurance: 25%.
    • Out-of-pocket threshold: $2,100.
    • Catastrophic coverage: $0 cost on covered drugs after the threshold.

    4. Extra Help and other programs that lower Part D costs

    If prescription costs still feel out of reach even under the new structure, Extra Help, also called the Low-Income Subsidy, can reduce or eliminate much of what you owe. Some people are deemed automatically eligible, including those enrolled in Supplemental Security Income or Medicaid, without needing to file a separate application.

    To find out where you stand:

    1. Check your income and resources against current Extra Help limits before applying.
    2. Apply through SSA.gov or by calling Social Security directly.
    3. Contact your local State Health Insurance Assistance Program for free, one-on-one help with the application.
    4. Keep recent pay stubs, bank statements, and Social Security award letters on hand, since SSA will ask for proof of income and resources.

    The Inflation Reduction Act also converted many partial subsidies into full subsidies, which means more people now qualify for the complete benefit than qualified for a partial one before. Extra Help can eliminate your premium and deductible entirely and cap your copays at just a few dollars per prescription. Our guide to Extra Help eligibility breaks down the current income brackets in more detail.

    Pro Tip: If you’re not sure whether you qualify for Extra Help, apply anyway. SSA determines eligibility based on your actual numbers, not assumptions, and many people who think they earn too much turn out to qualify.

    Illustration of Extra Help eligibility review

    5. Practical ways to manage prescription costs beyond coverage stages

    The Medicare Prescription Payment Plan spreads your Part D out-of-pocket costs across the calendar year instead of hitting you with large bills early on. It doesn’t lower your total cost, but it smooths your cash flow, which matters if an expensive prescription lands in January.

    A few other moves help control what you spend over the year:

    • Compare formularies before enrolling, since the same drug can sit on different tiers across plans.
    • Ask your prescriber about therapeutically equivalent generics for maintenance medications.
    • Request 90-day fills when your plan allows them, which often lowers the per-dose cost.
    • Use your plan’s preferred pharmacy network whenever possible.
    • Review prior authorization requirements early so a denial doesn’t delay treatment.

    A SHIP counselor or a licensed Medicare agent can run an annual policy audit to confirm you’re still on the right plan as formularies and pricing shift year to year.

    6. How we help beneficiaries navigate Part D changes

    We work with seniors to make sense of exactly these kinds of changes. Our Part D penalty calculator and enrollment timeline tool help you see where you stand before a deadline sneaks up. We treat each annual policy audit as a chance to catch cost increases before they hit your wallet.

    — Core Insurance Solutions

    How we help you choose a Part D plan and cut prescription costs

    Picking the right Part D plan under the new rules still comes down to detail the average person doesn’t have time to compare across many carriers. We do that comparison for you, at no direct cost, through:

    Core Insurance Solutions

    • A holistic health needs assessment that looks at your actual medications, not just your zip code.
    • Unbiased carrier comparisons across the major Part D providers we work with.
    • Prescription cost optimization aimed at keeping you out of unnecessary high-tier spending.
    • Annual Rate Watch policy audits so your plan keeps pace with formulary changes.
    • Claims advocacy if a payment or coverage decision doesn’t go the way it should.

    If you want a straight answer on which Part D plan fits your prescriptions this year, visit our Part D plans page and we’ll walk through it with you directly.

    This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.

    FAQ

    What is the big mistake people make with Medicare?

    The most common mistake is enrolling in a Part D or Medicare Advantage plan based on premium alone and never checking the drug formulary. A plan with a low premium can still cost far more over the year if your specific medications sit on a high tier or require prior authorization.

    Is the donut hole still a thing?

    No. As of 2026, the Part D redesign replaced the old coverage gap with a three-stage model that leads to a $2,100 annual out-of-pocket cap, after which covered drugs cost nothing for the rest of the year.

    What if I can’t afford my prescriptions?

    Start by checking your eligibility for Extra Help through Social Security, which can eliminate your premium and deductible and cap copays at a few dollars. The Medicare Prescription Payment Plan can also spread your costs evenly across the year if cash flow, rather than total cost, is the main problem.

    Is Medicare Part D really necessary?

    Part D coverage protects you against a late-enrollment penalty that grows the longer you go without creditable drug coverage, and it caps your annual drug spending at $2,100 under the 2026 rules. Even beneficiaries on few medications typically benefit from the penalty protection and the spending cap alone.

    Sources

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