Medicare Part D Out-of-Pocket Cap Explained
Published October 29, 2026 路 6 min read 路 Figures last verified October 29, 2026
Reviewed by D.P., PharmD.
- The old Part D "donut hole" coverage gap was eliminated on January 1, 2025. Part D now has three phases, not four, and a hard yearly cap on what you pay for covered drugs.
- The cap is $2,100 in 2026 and $2,400 in 2027. Once your qualifying out-of-pocket spending on covered drugs reaches the cap, you pay $0 for covered drugs for the rest of the calendar year.
- The standard deductible counts toward the cap: at most $615 in 2026 and $700 in 2027. Many plans charge less, or charge no deductible on some drug tiers.
- Your monthly premium does not count toward the cap, and neither do drugs your plan does not cover. The cap is a drug-cost ceiling, not a ceiling on all health spending.
- Annual Enrollment Period (AEP): October 15 to December 7. You can join, switch, or drop Medicare Advantage and Part D plans. Changes take effect January 1.
- Medicare Advantage Open Enrollment: January 1 to March 31. Already in a Medicare Advantage plan? You can switch to a different Advantage plan or back to Original Medicare once.
- General Enrollment Period: January 1 to March 31. Missed your initial window for Parts A and B? You can still sign up here; coverage starts July 1.
If you search for the Medicare "donut hole," you will still find it everywhere: old articles, old plan booklets, and older advice from friends. The search term survives, but the thing it describes does not. Since January 1, 2025, there is no coverage gap phase in Part D. In its place is a single annual ceiling on what you pay out of pocket for covered prescription drugs, and once you hit it, covered drugs cost you nothing for the rest of the year.
It is November, and the pharmacy total that used to jump around during the year has stopped jumping. The copay that once ballooned in the fall now reads $0. The year's drug spending meter filled up, and the rest of the year is covered.
What the cap is, in one paragraph
Medicare Part D is the part of Medicare that pays for prescription drugs you take at home, delivered either by a standalone Part D plan or bundled into a Medicare Advantage plan. Under the standard benefit, your out-of-pocket spending on covered drugs is tracked across the calendar year. When that tracked total reaches the annual threshold, $2,100 in 2026, $2,400 in 2027, you move into catastrophic coverage and pay no further cost sharing on covered drugs until December 31. On January 1, the meter resets and the new year's cap applies. The cap began at $2,000 in 2025, and the Centers for Medicare and Medicaid Services (CMS) adjusts it each year based on growth in average covered drug spending per person.
The three phases, without the donut hole
Before 2025, Part D had four phases: deductible, initial coverage, the coverage gap (the donut hole), and catastrophic coverage. In the gap phase, people paid a larger share for a stretch of the year, which is why fall pharmacy bills used to spike. That phase is gone. Here is the benefit now, under the standard benefit:
| Phase | What you pay | When it ends |
|---|---|---|
| 1. Deductible | The full plan price of covered drugs, up to the plan deductible | When you have paid the deductible: at most $615 in 2026, $700 in 2027 |
| 2. Initial coverage | Generally 25% coinsurance on covered drugs (many plans use flat copays by tier instead) | When your qualifying out-of-pocket spending reaches $2,100 in 2026, $2,400 in 2027 |
| 3. Catastrophic coverage | $0 for covered drugs | December 31; the meter resets January 1 |
Two details in that table matter more than they look. First, the deductible is part of the cap, not on top of it: a $700 deductible in 2027 already counts $700 toward the $2,400. Second, the 25% figure is the standard benefit's coinsurance. Real plans vary: many charge flat copays for generic tiers, and many charge no deductible at all on lower tiers. Your plan's own documents, not the standard benefit, set what you actually pay at each step.
What counts toward the cap, and what does not
Medicare tracks the total as true out-of-pocket costs. What counts: the deductible you pay, the copays and coinsurance you pay on covered drugs, and certain payments made on your behalf, such as through the Extra Help program for people with limited income and resources. What does not count: your monthly plan premium, which you pay whether or not you fill a prescription, and any spending on drugs your plan does not cover. A drug that is not on your plan's formulary, or that the plan has denied, does not move the meter, which is one more reason a plan's drug list matters as much as its premium. Our guide on comparing plans on total cost walks through how to check that list before enrollment closes.
A simple illustration of the arithmetic
Consider the standard benefit in 2027, as arithmetic only, not a prediction about any real plan. After a $700 deductible, $1,700 of out-of-pocket room remains before the $2,400 cap. At 25% coinsurance in the initial coverage phase, $1,700 of your own spending corresponds to $6,800 of covered drug costs. Add the deductible phase, and the cap is reached after $7,500 of covered drug costs in the year, with you having paid $2,400 of it. Plans with flat copays reach the cap on a different path, but the destination is the same: $2,400 paid, then $0 for covered drugs.
What the cap does not do
The cap is narrow by design, and its limits surprise people. It does not cap your plan premium, a separate monthly bill. It does not cap hospital or doctor care under Parts A and B, which have their own cost sharing, separate from the Part D drug cap. It does not make every drug free: only drugs your plan covers count, and only after the meter fills. And it does not carry over: December spending does not count toward January.
Two related protections sit outside the cap but are worth knowing. Covered insulin under Part D costs no more than $35 for a one-month supply, and adult vaccines recommended by the CDC's vaccine advisory committee cost $0 under Part D; neither is subject to the deductible. Separately, every Part D plan must offer the Medicare Prescription Payment Plan, which lets you spread your out-of-pocket drug costs across the calendar year in monthly payments instead of paying large amounts at the pharmacy counter. That option changes when the money is due, not how much you owe in total, and it does not change the cap itself.
How to check your own number
The standard figures in this guide are ceilings and defaults, not your plan's figures. Your plan's Annual Notice of Change, mailed each fall, lists your actual deductible and drug tiers. Medicare's official tool, Plan Compare at medicare.gov, takes your drugs and pharmacy and shows total estimated yearly costs under each available plan; we do not host our own estimator. For free one-on-one help reading those results, your state's SHIP program offers unbiased counseling. If an old article or booklet still describes a donut hole phase for 2026 or 2027, treat it as out of date: the gap ended in 2025, and the cap is what replaced it.
This guide explains how Medicare Part D costs and the out-of-pocket cap work. It doesn't advise which coverage to choose, doesn't recommend any plan, and doesn't advise starting, stopping, or switching any medication. Those decisions belong to you, your doctor, and your pharmacist. For personal guidance, use Medicare Plan Compare or contact your local SHIP program. Full disclaimer.
Sources
- Centers for Medicare & Medicaid Services, Final CY 2026 Part D Redesign Program Instructions (2026 deductible $615, 2026 out-of-pocket threshold $2,100, 25% initial coverage coinsurance, $0 catastrophic cost sharing, benefit phases)
- Centers for Medicare & Medicaid Services, Announcement of Calendar Year (CY) 2027 Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies, April 6, 2026, Attachment V, Table V-2 (2027 standard deductible $700, 2027 out-of-pocket threshold $2,400)
- Centers for Medicare & Medicaid Services, Medicare Prescription Payment Plan (monthly installment option for out-of-pocket drug costs)
- KFF, A Current Snapshot of the Medicare Part D Prescription Drug Benefit (Part D benefit structure, coverage gap elimination, insulin and vaccine cost rules)
- Medicare.gov, Medicare Plan Compare (official plan and drug-cost comparison tool)