Medicare Part D Donut Hole and Chronic Condition

If you have a chronic condition that requires ongoing medication, the elimination of the Part D coverage gap (the “donut hole”) is significant. Below is information about how the donut hole used to work — preserved for historical reference — followed by what the current 2026 structure means for people with chronic conditions.

What is Medicare Part D?

First, a quick overview of Medicare Part D. Medicare is a federal health insurance program for people over the age of 65, as well as some people under 65 with certain disabilities or conditions. Medicare Part D is a prescription drug plan that’s available to people with Medicare. The program helps pay for the cost of prescription drugs, and it’s offered by private insurance companies that are approved by Medicare.

What the Medicare Part D Donut Hole Was (Historical)

Before 2025, the Medicare Part D donut hole was a coverage gap that began once a beneficiary and their insurance company had spent a certain amount on prescription drugs in a calendar year. Once that initial coverage limit was reached, the beneficiary entered a phase where they were responsible for a higher share of the cost of their drugs until they hit the catastrophic coverage threshold, at which point Medicare picked up most of the remaining cost.

By the final year of the donut hole’s existence (2024), the beneficiary share during the gap was 25% on both brand-name and generic drugs. The structure was confusing and produced unpredictable spikes in out-of-pocket spending mid-year — a particular hardship for people with chronic conditions who took expensive maintenance medications.

How 2026 Part D Works for People with Chronic Conditions

Starting January 1, 2025, the Inflation Reduction Act eliminated the donut hole and replaced it with a hard out-of-pocket cap. For 2026, that cap is $2,100. The new three-phase structure works like this:

• Deductible phase: You pay 100% of your drug costs until you meet your plan’s deductible (up to $615 maximum in 2026).
• Initial coverage phase: After the deductible, you pay 25% coinsurance on covered drugs until your out-of-pocket spending reaches $2,100.
• Catastrophic coverage phase: Once your out-of-pocket spending hits $2,100, you pay $0 for covered drugs for the rest of the calendar year.

For people with chronic conditions taking expensive medications, this is a meaningful change. Annual prescription drug costs are now bounded by a predictable number. In the past, a beneficiary on a specialty drug could face thousands of dollars in mid-year out-of-pocket spending; now, that exposure is capped at $2,100 per calendar year, regardless of how expensive their medications are.

The Medicare Prescription Payment Plan

Even with the $2,100 cap, paying that amount at the pharmacy counter all at once can be a hardship. Medicare also offers the Medicare Prescription Payment Plan, which spreads your out-of-pocket Part D costs into predictable monthly installments rather than requiring full payment at the time of dispensing. This is especially valuable for beneficiaries with chronic conditions who hit the $2,100 cap early in the year.

Tips for Managing Prescription Drug Costs in 2026

If you have a chronic condition that requires ongoing medication, here are practical ways to manage your Part D costs:

Talk to your doctor about alternative treatments or lower-cost medications

In some cases, there may be alternative treatments or lower-cost medications that can help manage your condition. Talk to your doctor about your options and see if there’s a more affordable medication that could work for you.

Seek out patient assistance programs

Many pharmaceutical companies offer patient assistance programs that can help cover the cost of medication for people who can’t afford it. These programs may have specific eligibility requirements, so be sure to check with the manufacturer to see if you qualify.

Use generic drugs whenever possible

Generic drugs are often much less expensive than brand-name drugs, so whenever possible, ask your doctor if there’s a generic version of your medication that you can use instead.

Look into Medicare Savings Programs and Extra Help

Medicare Savings Programs are state-run programs that help people with low income pay for their Medicare premiums, deductibles, and coinsurance. The federal Extra Help program (Low-Income Subsidy) also assists eligible beneficiaries with Part D costs. Depending on your income and assets, you may qualify for one or both.

Review your Medicare Part D plan every year

Plans change formularies, tiers, and pricing annually. The right plan for your specific medications this year may not be the best choice next year. Our licensed agents can compare plans for you during open enrollment to ensure your medications stay affordable.

Final Thoughts

The Medicare Part D donut hole is no longer something you need to plan around — it was eliminated on January 1, 2025. In its place, beneficiaries now have a hard $2,100 out-of-pocket cap (in 2026) on covered Part D drug costs. For people with chronic conditions, this means significantly more predictable annual prescription drug expenses. Combined with the Medicare Prescription Payment Plan, generic drug options, Medicare Savings Programs, and annual plan reviews, managing prescription costs with a chronic condition is now substantially easier than it was just a few years ago. See additional tips for saving money on prescriptions.