The Part D donut hole — what changed for 2026

Original Part D had four phases that you moved through as your annual drug spending added up:

1. Deductible (typically $200–$545). You pay the full cost until you hit it.
2. Initial coverage ($545 to ~$5,030 in total drug spend). You pay 25%, the plan pays 75%.
3. The donut hole (~$5,030 to ~$8,000 total). You pay 25-44% — but the total drug cost (including manufacturer discounts) counted toward catastrophic threshold. This phase confused everyone.
4. Catastrophic (~$8,000+). You pay 5% — for the rest of the year. No cap.

The donut hole gradually shrank from 2011 onward (ACA provision), and by 2020 your share in the gap matched the 25% in initial coverage. But: there was no out-of-pocket cap. Someone on $200,000/yr in cancer drugs could pay $10,000+ out-of-pocket annually, every year, indefinitely.

Three phases, none of which has a “donut hole”:

1. Deductible (up to $615 in 2026 — capped by CMS). You pay the negotiated drug cost up to this amount.
2. Initial coverage (after deductible, until you hit the OOP cap). You typically pay 25% coinsurance or a tiered copay.
3. Catastrophic (after $2,100 in OOP costs). You pay $0 for the rest of the year. The plan pays everything.

Plus: insulin is capped at $35/month per Part D plan, regardless of which phase you're in.

New for 2025, continuing in 2026: you can opt to spread your annual Part D out-of-pocket costs across the year as monthly payments instead of paying at the pharmacy counter. Useful if you have an expensive specialty drug that would otherwise eat your January paycheck.

• You pay $0 at the pharmacy.
• The plan calculates a monthly bill based on how close you are to the OOP cap. Caps at 1/12 of the OOP max — so the most you'd pay any month is $175.
• You enroll in M3P through your Part D plan, not CMS.

• Plan premiums went up to fund the cap. The Part D base premium rose ~25% from 2024 to 2025 because plans now bear more catastrophic-phase risk. Your premium-vs-OOP tradeoff changed.
• Some plans tightened formularies. With the cap, plans have more incentive to put expensive drugs on prior auth or bump them to higher tiers. Specialty-drug users should re-check formularies every AEP.
• The cap resets every January 1. If you hit it in December, your January spending starts from zero again.
• Out-of-network and uncovered drugs don't count. Drugs not on your plan's formulary, or filled at out-of-network pharmacies, don't count toward the $2,100 cap.