The Medicare Part D Coverage Gap Explained Simply

When Frank's pharmacy bill suddenly jumped from $15 to $90 for the same medication, he thought it was an error. His pharmacist explained he'd entered the Part D "donut hole" — the coverage gap. Here's how Part D works in four stages: Stage 1 (Deductible): You pay full price until you meet your plan's deductible (up to $590 in 2026, though some plans have no deductible). Stage 2 (Initial Coverage): You pay copays or coinsurance for your drugs. Your plan pays the rest. This continues until total drug costs (what you and your plan paid combined) reach $5,030 in 2026. Stage 3 (Coverage Gap / Donut Hole): This is where costs used to skyrocket. But thanks to the Inflation Reduction Act, the donut hole has been significantly closed. You'll pay a reduced coinsurance rate for brand-name and generic drugs. Stage 4 (Catastrophic Coverage): Once your out-of-pocket spending reaches $2,000 for the year, you enter catastrophic coverage and pay $0 for covered Part D drugs for the rest of the year. This $2,000 annual cap is new as of 2025 — previously there was no cap, and some patients spent $10,000+ on medications. How to manage: Ask your doctor about generic alternatives (they cost less and count toward your cap). Use your plan's preferred pharmacy for lower copays. Review your Part D plan during open enrollment every year — formularies change. If you have limited income, apply for Extra Help (Low Income Subsidy) through Social Security.