Medicare

Donut Hole (Part D Coverage Gap)

The Part D coverage gap (donut hole) was effectively closed by the Inflation Reduction Act, which capped out-of-pocket drug costs at $2,000 in 2025, rising to $2,100 in 2026.

Last reviewed: May 2026 · Editorial methodology

Definition

The Part D coverage gap, colloquially called the 'donut hole,' was a temporary period in the Medicare prescription drug benefit where beneficiaries paid a larger share of their drug costs after their plan's initial coverage limit was exhausted but before reaching the catastrophic coverage threshold. The gap was created by the original 2003 Part D legislation and subjected many beneficiaries — particularly those with high drug costs — to paying 25–100% of drug costs during a middle phase of coverage. The ACA began closing the donut hole incrementally starting in 2010, and the Inflation Reduction Act completed its elimination: beginning in 2025, beneficiaries pay no more than 25% cost-sharing during the coverage gap phase, and once total out-of-pocket spending reaches $2,100 in 2026, cost-sharing drops to $0 for the remainder of the year — effectively eliminating the financial shock the donut hole once caused. The $2,100 OOP cap is indexed to grow at 35% of Part D per capita spending growth in future years. Extra Help enrollees receive even lower cost-sharing throughout the year.

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Related terms

Medicare Part DMedicare Part D covers prescription drugs and features a $2,100 out-of-pocket cap in 2026, ending the coverage gap that previously left beneficiaries with full costs.Catastrophic Coverage PhaseOnce a Part D enrollee spends $2,100 out-of-pocket on covered drugs in 2026, they enter the catastrophic phase and pay nothing for the rest of the year.Extra Help (Low-Income Subsidy)Extra Help (also called the Low-Income Subsidy or LIS) dramatically lowers prescription drug costs for Medicare beneficiaries with limited income and resources.MAPD (Medicare Advantage Prescription Drug)MAPD plans combine the hospital, medical, and drug benefits of Medicare Parts A, B, and D into one integrated plan from a private insurer.Medicare Prescription Payment Plan (M3P)The M3P program, launched in 2025, smooths Part D drug costs throughout the year so beneficiaries are not hit with large out-of-pocket payments early in the year.

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Source: Cover Forge USA editorial team|Last verified: May 2026|Methodology
Definitions are educational and may be simplified. Always refer to your policy contract and consult a licensed agent for terms that affect coverage decisions.
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Cover Forge USA Editorial Team

Editorial Lead

This article was researched and written by the Cover Forge USA editorial team against federal sources (NAIC, CMS, FEMA, DOL, SSA, state DOIs) and standard policy forms. Bylines organize content by topic — they do not assert individual licensure. See our editorial-policy for details.

Reviewed June 2026

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