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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

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.