Medicare Part D Coverage phases 2026
With significant changes enacted under the Inflation Reduction Act (IRA), Medicare Part D prescription drug coverage is now simpler and more predictable. Beginning in 2025, beneficiaries no longer experience a “donut hole,” and starting in 2026, cost thresholds slightly increase to keep pace with inflation. This blog explains the Medicare Part D Coverage Phases for 2026.
Part D Coverage: Three Straightforward Phases
1. Deductible Phase
- In 2026, CMS will implement a maximum standard deductible of $615 (increased from $590 in 2025). Beneficiaries pay 100% of drug costs out of pocket until they meet the deductible. Keep in mind, plan providers have the option to offer a lower or zero deductible.
2. Initial Coverage Phase
- Once the beneficiary meets the deductible, they enter the initial coverage phase.
- In this phase beneficiaries may pay up to 25% coinsurance on covered drugs. Pleas note; most drug plans do not charge coinsurance for tier 1 or even tier 2 drugs.
- Beneficiaries continue to pay coinsurance until their total out‑of‑pocket spending reaches $2,100 in 2026 (previously $2,000 in 2025).
- There is no Initial Coverage Limit (ICL) separate from your out‑of‑pocket threshold, so no “gap” in coverage.
3. Catastrophic Phase
- Once the beneficiary has spent $2,100 out of pocket on formulary (covered) drugs, they enter the catastrophic phase.
- In this phase, beneficiary coinsurance drops to $0; they have no further cost-sharing on covered Part D drugs for the rest of the year.
Watch a YouTube video on the Part D drug cap
What Happened to the Donut Hole
- The coverage gap (“donut hole”) was officially eliminated starting January 1, 2025.
- Instead of transitioning from initial coverage to a gap, enrollees transition directly into catastrophic coverage once they reach the annual out-of-pocket cap ($2,000 in 2025; $2,100 in 2026).
- This means no more confusing coinsurance changes mid‑year; just a smooth journey through three phases.
Why No “Donut Hole”
Before 2025, Part D had four somewhat confusing cost-share phases:
- Deductible → Initial Coverage → Coverage Gap (“donut hole”) → Catastrophic Coverage.
Thanks to the Inflation Reduction Act:
- The donut hole was discontinued, coinsurance standardized at 25%, and a hard cap on TrOOP at $2,000 in 2025.
- In other words: Simplified coverage and predictability was put in place.
2026 Standard Benefit Summary
| Phase | 2026 Threshold | Your Cost‑Share |
|---|---|---|
| Deductible | Up to $615 | 100% |
| Initial Coverage | $615 to spending $2,100 TrOOP | 25% |
| Catastrophic | After $2,100 OOP | $0 |
TrOOP stands for out of pocket. The TrOOP includes: deductible, copays and coinsurance. However the TrOOP does not include; plan premiums or drugs not covered under Part D of your plan.
Summary for Medicare Prescription Coverage 2026
- The year begins with beneficiaries paying up to $615 out of pocket toward their deductible.
- After that, they pay 25% of covered drug costs until their total out-of-pocket spending hits $2,100.
- Once they hit the cap, they move into catastrophic coverage and pay zero out-of-pocket for covered drugs for the rest of the year.
- As of 2025, the donut hole is gone, ensuring a smooth and straightforward benefit structure.
- Beneficiaries can consider enrolling in the Medicare Prescription Payment Plan if it helps spread out drug costs.
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2026 brings continued relief and clarity for Medicare Part D enrollees; no donut hole, no complicated phases, just predictable costs and peace of mind.