A Genuinely New Part D
Medicare Part D looks meaningfully different than it did a few years ago. The confusing 'donut hole' coverage gap is gone, and a hard annual cap on your out-of-pocket drug costs is in. If you learned how Part D worked back when it had four phases and a dreaded gap, it's worth relearning — because the redesign changed the math in your favor. We covered the headline cap in the $2,100 Part D cap; this guide walks through the full phase structure.
Understanding the phases matters because your drug costs change depending on which phase you're in during the year. Knowing where you are helps you anticipate costs and time expensive prescriptions.
The Three Phases in 2026
Part D now moves through three phases across the year, based on your accumulated spending:
- Deductible phase: you pay 100% of your drug costs until you meet the plan's deductible (plans set this up to a federal maximum; some have a $0 deductible)
- Initial coverage phase: after the deductible, you pay a share (copays or coinsurance) while the plan pays the rest, until your out-of-pocket spending reaches the annual cap
- Catastrophic phase: once you hit the $2,100 out-of-pocket cap in 2026, you pay $0 for covered drugs for the rest of the year
What Happened to the Coverage Gap?
For years, Part D had a fourth stage — the infamous 'donut hole' or coverage gap — where your share of drug costs jumped after initial coverage ended, before catastrophic coverage kicked in. It was confusing and expensive, and it's now gone, eliminated as part of the redesign. We tell that story in whatever happened to the donut hole.
In its place is the clean, capped structure above. The practical effect: your worst-case drug spending is now limited and predictable in a way it never was before. For people on expensive medications, this is one of the most significant improvements to Medicare in years.
Making the Phases Work for You
A few practical implications. Because there's now a hard $2,100 cap, someone with very high drug costs will hit it and then pay nothing more — so the total annual exposure for expensive medications is capped and knowable. If those costs are front-loaded, you might hit the cap early in the year and enjoy $0 drugs for months. There's also a Medicare Prescription Payment Plan that lets you spread these costs across the year instead of paying a big bill in January.
Which plan minimizes your costs still depends heavily on your specific medications and their formulary tiers — the phases set the structure, but the formulary sets your actual prices within it. Running your exact drug list against every plan in your county each fall is how you find the lowest total cost. That's the drug-by-drug comparison we do for clients at no charge, and the official Plan Finder lets you see it yourself.
Frequently Asked Questions
How many phases does Medicare Part D have in 2026?
Three: the deductible phase (you pay 100% until the deductible is met), the initial coverage phase (you pay a share), and the catastrophic phase (you pay $0 after hitting the $2,100 out-of-pocket cap). The old coverage gap has been eliminated.
Is the Medicare donut hole gone?
Yes. The coverage gap (donut hole) was eliminated in the Part D redesign. In its place is a simpler structure with a hard $2,100 annual out-of-pocket cap in 2026, after which covered drugs cost nothing.
What is the Part D out-of-pocket cap in 2026?
$2,100. Once your out-of-pocket spending on covered drugs reaches that amount, you pay nothing more for covered medications for the rest of the year — a hard cap that didn't exist before 2025.
Does every Part D plan have a deductible?
No. Plans can set a deductible up to a federal maximum, but some plans have a $0 deductible. The deductible is one of the factors to weigh when comparing plans against your specific medications.
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