For roughly eighteen years the donut hole was the single most feared feature of Medicare drug coverage. People planned around it, budgeted for it, and got blindsided by it every summer when a pharmacy suddenly charged four times what it had charged in March.
It does not exist anymore. This page explains what happened to it, what the old gap actually was for the people who still remember it, and what the benefit looks like in 2026 instead. All figures were verified on September 6, 2026 against CMS documents.
The Donut Hole Is Gone
Section 11201 of the Inflation Reduction Act of 2022 (Public Law 117-169, signed August 16, 2022) rewrote the structure of the defined standard Part D drug benefit. CMS implemented it in the Final CY 2025 Part D Redesign Program Instructions, released April 1, 2024, which state that in CY 2025 the IRA eliminates the coverage gap phase and the related Coverage Gap Discount Program, replacing the latter with a new Manufacturer Discount Program.
The effective date was January 1, 2025. There has been no coverage gap phase in Medicare Part D for any of 2025 or 2026.
This is not a temporary administrative posture. CMS’s Contract Year 2027 Medicare Advantage and Part D final rule explains that the IRA gave CMS authority to implement the redesign through program instructions only through 2026, and that with that authority expiring CMS is codifying the changes into regulation for 2027 and beyond, specifically listing the elimination of the coverage gap phase, a reduced annual out-of-pocket threshold, removal of cost sharing in the catastrophic phase, and the Manufacturer Discount Program that replaced the Coverage Gap Discount Program on January 1, 2025.
If you search “medicare coverage gap” and land on a page describing a third phase you enter mid-year, that page is describing 2024 or earlier.
What the Old Coverage Gap Actually Was
The pre-2025 benefit had four phases. You paid the deductible, then 25% coinsurance in the initial coverage phase, then you hit the initial coverage limit. That limit was based on total drug spending, yours and your plan’s combined, which is why it arrived faster than people expected.
Past that line you were in the gap. The statute at 42 U.S.C. 1395w-102(b)(2) set the generic-gap coinsurance percentage at 25% for 2020 through 2024. For brand drugs the same section set an applicable gap percentage of 75% for 2019 through 2024, reduced by a discount percentage the statute fixes at 50 percent for those same years, which lands the enrollee at 25% as well. That is why “25% in the donut hole” is the version most people remember.
Read the current text of that section and the sunset is visible in the statute itself. Both the generic-gap and applicable-drug coverage gap provisions now apply only “for a year preceding 2025.”
The gap did not end until your true out-of-pocket spending reached the annual threshold. In 2024, the last year the gap existed, CMS Table V-2 of the CY 2024 Rate Announcement set the deductible at $545, the initial coverage limit at $5,030 and the out-of-pocket threshold at $8,000. CMS estimated total covered Part D spending at that threshold at $11,477.39 for a non-applicable beneficiary.
That is the number worth sitting with. To get out of the donut hole in 2024 you generally had to be part of roughly $11,500 in total drug spending, having personally paid $8,000 of it.
What Replaced It
Three phases, and the third one costs nothing.
| Old benefit (through 2024) | Current benefit (2026) | |
|---|---|---|
| Number of phases | Four | Three |
| Phase 1, deductible | $545 in 2024, you pay 100% | $615 in 2026, you pay 100% |
| Phase 2, initial coverage | 25% coinsurance up to a $5,030 initial coverage limit (2024) | 25% coinsurance, no initial coverage limit |
| Phase 3 | Coverage gap: 25% coinsurance on brands and generics | Does not exist |
| Exit to catastrophic | $8,000 in out-of-pocket spending (2024) | $2,100 in out-of-pocket spending (2026) |
| Catastrophic cost sharing | 5% coinsurance historically, $0 from 2024 | $0 |
| Manufacturer role | Coverage Gap Discount Program | Manufacturer Discount Program |
The current parameters come from the Final CY 2026 Part D Redesign Program Instructions: an enrollee pays 100% of gross covered drug costs until the $615 deductible is met, then 25% coinsurance in the initial coverage phase, and that phase ends at the annual out-of-pocket threshold of $2,100, after which the enrollee pays no cost sharing at all.
CMS has already announced 2027. Table V-6 of the CY 2027 Rate Announcement, dated April 6, 2026, sets the 2027 deductible at $700 and the 2027 out-of-pocket threshold at $2,400. Both are indexed each year to the annual percentage increase in average Part D drug spending, which CMS put at 13.65% for 2027.
What This Changed for Real Spending
Compare the two ceilings directly. In 2024 you needed $8,000 of your own money before catastrophic coverage started, and even then earlier versions of the benefit charged 5% coinsurance above the line. In 2026 you need $2,100, and above it you pay zero.
That is a reduction of roughly three-quarters in the amount a person on expensive drugs can be asked to spend in a year. For someone taking a specialty medication, the practical effect is that the worst possible year now costs their plan premium plus $2,100.
Two carve-outs sit below even that. Insulin is capped at $35 for a one-month supply of each covered product with no deductible, under section 1860D-2(b)(9) of the Social Security Act as added by section 11406 of the IRA. Adult vaccines recommended by the CDC’s advisory committee cost $0 with no deductible, under section 1860D-2(b)(8) as added by section 11401. Neither has ever had anything to do with the coverage gap, but both landed in the same law.
The full breakdown of what the current benefit costs, including premiums and the income surcharge, is in the Part D cost guide.
Where You Still Feel a Gap
The cap is annual. Your bank account is monthly. That mismatch is the real residual pain, and it is not the donut hole.
Here is the shape of it. You start January owing the full deductible, up to $615, and then 25% coinsurance on everything. Someone on a drug with a $2,000 monthly list price can burn through the deductible and a large share of the $2,100 cap inside the first two months, then pay nothing for ten months. The annual total is genuinely lower than it used to be. The January bill can still be brutal.
Congress anticipated this. The Medicare Prescription Payment Plan, created by section 11202 of the same law and live since January 1, 2025, lets you spread that same capped amount across the remaining months of the calendar year with no interest and no fees. It lowers nothing. It only moves when you pay.
The other pressure point is what counts. The cap applies to covered Part D drugs on your plan’s formulary. A drug your plan excludes, or a cash purchase you make outside the plan, does not count toward the $2,100. So a discount card can be the right call on a cheap generic and the wrong call on the expensive drug that would otherwise carry you to the ceiling.
Deductibles have also gotten harder to dodge. KFF’s June 2026 analysis found 78% of stand-alone plan enrollees now face the full $615 deductible and only 4% have no drug deductible, down from 15% in 2025. Plans have been passing redesign costs back through the deductible, so the front of the year is heavier than it was even two years ago. That is worth weighing when choosing a Part D plan.
If the size of the bill is the problem rather than its timing, Extra Help is the program that actually reduces it, replacing coinsurance with $5.10 and $12.65 copays in 2026, and Medicare Savings Programs are the adjacent door.
Bottom Line
The donut hole was eliminated on January 1, 2025 by section 11201 of the Inflation Reduction Act, and CMS wrote the elimination into regulation for 2027 and beyond. What you have now is a deductible of up to $615, 25% coinsurance, and a hard stop at $2,100, rising to $700 and $2,400 in 2027. Anyone still budgeting around a mid-year coverage gap is budgeting for a benefit that no longer exists. For how the pieces fit together, see Medicare Part D and the Medicare parts explained.