The Medicare Part D "donut hole" (coverage gap) is eliminated as of January 1, 2025, due to the Inflation Reduction Act. It is replaced by a simplified 3-stage structure with a $2,000 annual cap on out-of-pocket prescription drug costs.
The Coverage Gap stage, or “donut hole,” is going away in 2025. You will now have 3 drug payment stages as part of your Part D benefit: Deductible, Initial Coverage, and Catastrophic Coverage. The Gap Phase (also known as the donut hole) is being removed in 2025.
As of 2025, the Medicare Part D “donut hole” no longer exists – meaning there is no longer a coverage gap during which Part D enrollees face higher drug costs. The “donut hole” was eliminated thanks to provisions of the Affordable Care Act (ACA) and the Inflation Reduction Act (IRA).
Yes, the Biden administration, through the Inflation Reduction Act (IRA) signed in 2022, eliminated the Medicare Part D "donut hole" (coverage gap) as of January 1, 2025, replacing it with a simpler structure that includes a $2,000 out-of-pocket cap on drug costs for the year, after which beneficiaries pay nothing for covered drugs. This change means beneficiaries now move directly from initial coverage to catastrophic coverage, simplifying costs and providing significant financial relief.
You enter the catastrophic phase if you've spent a certain amount of money for covered medicines. During this stage, you'll pay nothing for your covered Part D drugs. The Coverage gap phase, known as the Medicare donut hole, was eliminated in 2025 due to changes implemented by the Inflation Reduction Act (IRA).
Ask your physician or pharmacist if there is a generic drug available. Until the generic drug donut hole closes in 2024, check with your insurance to see whether the brand name or generic drug is more cost effective. Or see if there is a similar medication for the same medical condition available at a lower cost.
For 2026, Medicare Part D plans feature a significant change with a new $2,100 out-of-pocket (OOP) cap for prescription drugs, meaning after you spend that amount, your plan pays 100% for covered meds for the rest of the year, plus lower average premiums (around $34.50) and insulin costs capped at $35 monthly. Key shifts include a maximum deductible of $615 and automatic enrollment/renewal for the Medicare Prescription Payment Plan (MPPP). Enrollees should compare plans during Open Enrollment (Oct 15–Dec 7) to find the best fit for their specific medications and pharmacies.
The donut hole of no coverage finally closed for good in 2020, having phased out in 2019 for brand-name drugs and in 2020 for generic drugs. Sign up for the latest health news, fitness and nutrition updates and more!
The $2,000 prescription cap for seniors is a real benefit from the Inflation Reduction Act (IRA) that began in 2025, setting a limit on out-of-pocket prescription drug costs for Medicare Part D enrollees, meaning beneficiaries pay no more than $2,000 annually for covered medications, with the cap increasing to $2,100 in 2026. This major change eliminates the "donut hole" and provides significant savings for seniors with high drug costs, allowing costs to be spread out monthly.
The extra $144 added to Social Security usually comes from the Medicare Part B Giveback benefit, offered by some Medicare Advantage (Part C) plans, which pays back some or all your Part B premium, showing up as extra money in your check if it's deducted from your Social Security. To qualify, you need Original Medicare (Parts A & B), pay your own Part B premium, live in a plan's service area, and enroll in a specific Medicare Advantage plan that offers this "rebate," with the amount varying by plan and location.
In the donut hole, you pay a percentage of the cost for your prescription drugs. For generic drugs, you pay 25% of the cost of the drug and dispensing fee, and your plan pays the remaining cost.
The Medicare donut hole went away in 2025
The Part D coverage gap, also known as the donut hole, was eliminated in 2025. This change impacted how enrollees budget for prescriptions, and it will do so in 2026 as well. The Medicare donut hole was a third phase of Medicare Part D prescription drug coverage.
GoodRx can't be used in combination with Medicare, but it can be used in place of Medicare. You may want to consider using GoodRx instead of Medicare when Medicare doesn't cover your medication, when you won't reach your annual deductible, or when you're in the coverage gap phase (“donut hole”) of your Medicare plan.
Tips on How to Avoid the Donut Hole Coverage Gap
Discuss lower-cost drug alternatives with your healthcare professionals. Seek out discounts on medications. Choose generic drugs over brand-name drugs. Opt for in-network pharmacies only.
Each year, the Medicare Part B premium, deductible, and coinsurance rates are determined according to provisions of the Social Security Act. The standard monthly premium for Medicare Part B enrollees will be $185.00 for 2025, an increase of $10.30 from $174.70 in 2024.
The Social Security increase for 2026 is a 2.8% Cost-of-Living Adjustment (COLA), announced by the Social Security Administration, raising average monthly benefits by about $56 for retirees and affecting nearly 71 million Americans starting in January 2026, with SSI payments beginning in late December 2025. This adjustment helps payments keep pace with inflation, though Medicare Part B premiums also increased for 2026, which is typically deducted from Social Security checks.
Here are some of the biggest Medicare mistakes to avoid: