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Does the Medicare donut hole still exist in 2026?

The Medicare 'donut hole' coverage gap, as most people knew it, effectively no longer exists as of 2025. The Inflation Reduction Act capped annual out-of-pocket Part D drug costs at roughly $2,000 (indexed each year), so there is no longer a gap where you pay 100% of drug costs. However, costs up to that cap can still be substantial for retirees on fixed incomes -- and past medical-card balances from gap years are a real and separate problem. This page explains what changed, how to lower your costs further, and where to get free help.

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By Dana Whitfield — Personal finance writer

What was the Medicare Part D donut hole?

If you have heard the phrase 'donut hole' from a parent, spouse, or your own Medicare paperwork, here is the plain-English version of what it meant. Traditional Medicare Part D drug coverage worked in stages. You paid a deductible, then shared costs with your plan through an initial coverage phase. Once your total drug spending (yours plus your plan's) crossed a threshold -- roughly $4,660 in 2023 -- you entered the coverage gap. Inside that gap, you paid a higher share of costs out of pocket, sometimes dramatically higher. You stayed in that gap until your own spending hit a catastrophic threshold, at which point cost-sharing dropped again.

That gap in the middle -- where costs spiked -- is what people called the donut hole. For retirees on maintenance medications, hitting that gap midyear was a real financial shock, sometimes forcing choices between drugs and groceries.

What the Inflation Reduction Act changed (2025 and beyond)

Congress passed the Inflation Reduction Act in 2022, and its most significant Part D change took full effect in 2025: a hard annual cap on out-of-pocket prescription drug costs for Medicare Part D enrollees. For 2025 the cap is $2,000, and it is indexed to rise with program costs in future years (check Medicare.gov each fall for the current figure, as it may change slightly year to year).

What this means practically:

Important honest caveat: costs up to the $2,000 cap can still be significant, especially if you take multiple brand-name or specialty drugs early in the year. The cap protects you from truly catastrophic annual costs, but it does not make Part D cheap for everyone. If your drugs cost $1,800 out of pocket by October, that is real money on a fixed income -- and the programs below can help bring that number down further.

New: the Medicare Prescription Payment Plan (M3P)

Also created by the Inflation Reduction Act, the Medicare Prescription Payment Plan (sometimes called M3P) lets enrollees spread their out-of-pocket Part D costs across monthly installments throughout the year rather than paying them all at once when they hit. If you face a large drug expense in January, this option can help smooth cash flow so you are not hit with the full amount in a single month. Contact your Part D plan directly or call 1-800-MEDICARE (1-800-633-4227) to ask about enrolling; availability depends on your specific plan.

Medicare Extra Help (Low-Income Subsidy)

Extra Help -- officially the Low-Income Subsidy (LIS) -- is a federal program run by the Social Security Administration that pays most or all of your Part D premiums, deductibles, and copayments if you qualify on income and assets. It is the single most powerful cost-reduction tool available for lower-income Part D enrollees, and a significant number of people who qualify never apply.

2026 income and resource estimates (verify current figures at SSA.gov or Medicare.gov, as limits are updated annually):

How to apply:

Medicare Savings Programs (pay your Part B premium)

Medicare Savings Programs (MSPs) are state-administered programs that can pay your Medicare Part B premium (and in some cases your Part A premium, deductibles, and copays) if you meet income and resource limits. Qualifying for an MSP also automatically qualifies you for Extra Help with Part D -- so these programs stack.

There are four MSP levels: QMB, SLMB, QI, and QDWI -- each with different income cutoffs and benefit levels. Contact your state Medicaid office or use BenefitsCheckUp.org (run by the National Council on Aging) to find out which programs you may qualify for in your state. SHIP counselors can also help you apply at no cost.

State Pharmaceutical Assistance Programs (SPAPs)

Many states run their own pharmaceutical assistance programs for seniors that wrap around or supplement Medicare Part D. Benefit structures vary -- some states pay a portion of your Part D costs directly, others provide drug-specific subsidies. Check your state's department of aging or health website, or search Medicare.gov/plan-compare for SPAP information in your state.

Manufacturer Patient Assistance Programs and NeedyMeds

If you take expensive brand-name medications, the manufacturer may offer a free or reduced-cost supply through a patient assistance program (PAP), even for Medicare beneficiaries. Eligibility rules differ by company and drug. Resources:

For more on manufacturer programs, see our patient assistance programs guide and our page on help paying for insulin and prescription costs.

GoodRx vs. your insurance: when to compare

This surprises many people: sometimes the cash price through a discount card like GoodRx is lower than your Medicare Part D copay, particularly for generic drugs at certain pharmacies. However, if you use a discount card for a purchase, that spending generally does not count toward your Part D out-of-pocket cap (the rules here are complex and evolving -- verify with your plan). For generic maintenance medications, it is worth comparing the GoodRx price at your pharmacy against your plan's cost before you pay. For brand-name specialty drugs where you want spending to count toward your cap, pay through Part D.

Switching plans during Open Enrollment

Medicare Part D plans vary enormously in which drugs they cover, at what tier, and at what cost. If your current plan's formulary changed and your medications are now more expensive, Open Enrollment (October 15 -- December 7 each year) is your annual window to switch to a plan that covers your specific drugs at lower cost. Use the Medicare Plan Finder at Medicare.gov/plan-compare -- enter your exact drugs and dosages to see real out-of-pocket cost estimates side by side. A SHIP counselor can walk through this with you for free.

What about old medical-card debt from past donut-hole years?

Before the cap took effect, many retirees charged prescription costs to a credit card or a medical financing card (such as CareCredit) during donut-hole months and then struggled to pay it down. If you are carrying that kind of unsecured debt now, it is a separate problem from your Part D coverage going forward.

Options worth exploring for past medical debt:

For a broader look at options for retirees carrying unsecured debt, see our guide: Debt help for retirees.

If a portion of your old balances sits on an unsecured medical credit card (not a secured loan, not a mortgage, not a tax bill -- strictly unsecured medical card balances), and the total is large enough that you genuinely cannot pay it down, speaking with a debt-relief specialist may be worth your time. Debt settlement for unsecured balances is one option, though it is not guaranteed, it is not right for everyone, and settled amounts above $600 may be reported to the IRS on a Form 1099-C as taxable income. It can also affect your credit score. Go in with full information; see our guide on how debt settlement affects your credit first.

Where to get free, unbiased help

These resources cost nothing and have no reason to steer you toward any particular product -- they are a good starting point before any other call you make:

This page is for general information only and is not medical or financial advice. Program rules, income limits, and benefit amounts change each year -- always verify current figures at Medicare.gov and SSA.gov or with a SHIP counselor.

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