If you have been researching Medicare prescription drug coverage, you may have heard about the “donut hole.” This nickname describes a former gap in Medicare Part D coverage when some people paid a larger share of their prescription costs.
The good news is that the Part D program changed significantly in 2025. The donut hole, also called the coverage gap, is no longer a separate stage of Part D coverage. In 2026, Medicare drug plans have an annual limit on what you may pay out of pocket for covered Part D drugs.
Understanding this change can make it easier to compare prescription drug plans as you prepare for Medicare.
What was the Medicare Part D donut hole?
For many years, Medicare Part D had several coverage stages. After a member and their drug plan reached a certain amount in total drug costs, the member entered the coverage gap, or donut hole.
While in that gap, the person often paid a higher percentage of the cost of brand-name and generic prescriptions. The rules improved over time, but the coverage gap could still be confusing, especially for people who took expensive medications.
The term “donut hole” may still appear in older articles, plan materials, or conversations. But it does not work the same way under today’s Part D rules.
Is there still a Medicare donut hole in 2026?
No, the separate Part D coverage gap has been eliminated. Beginning in 2025, Medicare redesigned Part D prescription drug coverage. Instead of moving through a separate donut-hole stage, members move toward an annual out-of-pocket limit for covered Part D medications.
For 2026, the annual out-of-pocket limit for covered Part D drugs is $2,100. This amount can change from year to year. Once your qualifying out-of-pocket spending reaches the limit, you generally pay nothing for covered Part D drugs for the rest of that calendar year.
That limit applies only to medications covered by your plan’s formulary, which is its list of covered drugs. It also applies when you use the plan’s rules, such as using an in-network pharmacy and getting prior authorization when required.
How does Medicare Part D coverage work now?
Part D plans may still have different cost-sharing steps, but the old donut-hole stage is gone. Here is a simple way to think about the current structure:
- Deductible: Some plans have a deductible. You may pay the full negotiated price of certain drugs until you meet it. Not every drug is always subject to the deductible.
- Initial coverage: After the deductible, if your plan has one, you typically pay a copayment or coinsurance for covered medications. A copayment is a set amount, while coinsurance is a percentage of the drug cost.
- Annual out-of-pocket limit: Once qualifying out-of-pocket costs reach the yearly limit, you generally pay $0 for covered Part D drugs for the remainder of the year.
Your plan may have rules that affect what you pay along the way. For example, a drug could be placed on a higher formulary tier, require step therapy, or have quantity limits. These details are important when selecting a Part D plan.
What counts toward the Part D out-of-pocket limit?
Generally, amounts you pay for covered Part D drugs count toward your out-of-pocket total. Certain discounts provided on eligible brand-name drugs may also count under the current Part D rules.
However, not every pharmacy expense counts. Costs for medications that are not covered by your Part D plan generally do not count. Neither do costs for drugs purchased outside your plan’s network unless the plan allows it in that situation.
Drugs covered under Medicare Part B also work differently. Part B may cover some medications given in a doctor’s office, clinic, or outpatient setting, such as certain infusions or injections. Those medications do not usually follow Part D rules.
What if a medication is not covered by my plan?
Every Part D plan has its own formulary. Plans can cover different drugs, place drugs on different tiers, and use different pharmacy networks. Benefits, premiums, deductibles, and drug costs may vary by plan, carrier, and location.
If your medication is not covered, you may have options. You can ask your doctor whether a covered alternative may be appropriate. You may also ask the plan for a coverage exception. An exception is a request for the plan to cover a drug that is not normally covered or to charge a lower cost-sharing amount in some cases.
An exception is not automatic, and approval can depend on the medical information provided and the plan’s rules. Still, it can be worth discussing with your doctor and plan if you need a specific medication.
Can the Medicare Prescription Payment Plan help?
The Medicare Prescription Payment Plan is another option that may help some people manage drug expenses. It lets you spread your out-of-pocket Part D costs into monthly payments over the plan year rather than paying a large amount all at once at the pharmacy.
This program does not reduce the total amount you owe for medications. Instead, it may make the timing of payments easier to manage. You can opt in through your Part D plan or Medicare Advantage plan with drug coverage.
It may be especially worth considering if you expect high prescription costs early in the year. Before enrolling, review how the monthly payments may fit your budget.
How can I avoid surprises with Part D drug costs?
The best step is to compare plans using your exact medication list. Include the name of each drug, dosage, how often you take it, and the pharmacies you prefer. A plan with a lower monthly premium may not always be the lowest-cost choice if it covers your prescriptions less favorably.
It is also wise to review your Part D coverage each fall during Medicare’s Annual Enrollment Period. Plans can change their formularies, pharmacy networks, deductibles, and copayments for the following year.
The end of the donut hole may make Part D easier to understand, but choosing coverage can still feel like a lot to sort through. If you would like free, no-pressure help reviewing how Medicare drug coverage fits with a Medicare Supplement plan, reach out to Eric. He can help you understand the choices available in your state.