Note: This article describes how the Medicare Part D “donut hole” worked prior to its elimination on January 1, 2025. It is preserved for historical reference. With the 2025 changes, there is no longer a coverage gap to “avoid” — your out-of-pocket spending is now capped at $2,100 annually (in 2026).

Can You Avoid the Donut Hole? (Historical Reference)

Before the donut hole was eliminated in 2025, beneficiaries used a number of strategies to minimize its impact. One strategy was to choose a Medicare Part D plan with a lower deductible, which could help delay the onset of the coverage gap. Beneficiaries could also work with their healthcare provider to identify cost-effective medications or explore generic alternatives to help reduce their out-of-pocket costs. Prescription assistance programs, such as manufacturer discounts or state pharmaceutical assistance programs, could also help cover some of the costs of prescription drugs.

None of this applies anymore. Under the post-2025 Part D structure, after you meet your deductible (up to $615 in 2026), you pay 25% coinsurance on covered drugs until your out-of-pocket spending reaches $2,100, at which point you pay $0 for the rest of the year. There is no middle “gap” phase to plan around.

What Was the Part D Donut Hole?

Medicare Part D is a prescription drug program offered by the federal government to help individuals with their medication costs. Historically, Part D coverage was not unlimited — once a beneficiary’s total drug spending reached the initial coverage limit, they entered a coverage gap known as the “donut hole.”

During the donut hole, beneficiaries paid a larger share of their prescription drug costs. By 2020, that share was 25% of the cost of brand-name and generic medications. The coverage gap continued until the beneficiary reached the catastrophic coverage threshold of out-of-pocket spending, at which point Medicare paid for the majority of their prescription drug costs.

The Inflation Reduction Act phased out this structure entirely. As of January 1, 2025, the donut hole was eliminated. Part D coverage now moves directly from the initial coverage phase into catastrophic coverage once a beneficiary’s out-of-pocket spending reaches the annual cap ($2,100 in 2026).

How the 2026 Part D Structure Works

If you are enrolled in Part D in 2026, here is how your costs are structured:

• Deductible phase: You pay 100% of your drug costs until you meet your plan’s deductible (up to a maximum of $615 in 2026). Some plans have a lower deductible or no deductible at all.
• Initial coverage phase: After the deductible, you pay 25% coinsurance on covered drugs (your plan pays the rest) 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 remainder of the calendar year.

Medicare also offers the Medicare Prescription Payment Plan, which lets you spread out-of-pocket costs into predictable monthly installments rather than paying large amounts at the pharmacy counter.

Strategies for Lowering Prescription Drug Costs in 2026

While the donut hole no longer exists, there are still ways to lower your Part D out-of-pocket costs and reach the $2,100 cap as efficiently (or as gradually) as fits your situation:

• Compare plans every year: Plans change formularies, tiers, and pricing annually. The right plan for your medications this year may not be the right one next year.
• Use generic medications when available: Generics are usually significantly less expensive than brand-name drugs.
• Apply for Extra Help (Low-Income Subsidy): This federal program assists eligible beneficiaries with premiums, deductibles, and copayments.
• Look into manufacturer assistance programs: Many pharmaceutical companies offer assistance programs for specific brand-name drugs.
• Talk to your doctor about lower-cost alternatives: A pharmacist or doctor may be able to suggest a different medication or dosage that lowers your costs.
• Use the Medicare Prescription Payment Plan: Spreads your $2,100 annual out-of-pocket exposure into monthly installments.

Final Thoughts

The Part D donut hole 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 — a significant improvement, especially for those taking specialty medications or multiple brand-name drugs. If you have questions about how your specific medications are covered under your current Part D plan, our licensed agents are happy to review your coverage and recommend changes during the next open enrollment period.