What Is the Medicare Donut Hole — and Does It Still Exist in 2027?

What the donut hole actually was

For most of Part D's history, dating back to 2006, the benefit had four coverage phases: a deductible phase, an initial coverage phase, the coverage gap (nicknamed the "donut hole"), and a catastrophic phase. In 2024, the last year the old structure existed, beneficiaries entered the coverage gap once they hit the plan's initial coverage limit, at which point they became responsible for 25% coinsurance on both brand-name and generic drugs, a noticeably higher share of cost than during the initial coverage phase. This created an unpredictable financial cliff for anyone on multiple expensive medications, often arriving without much warning partway through the year.

The 25% coinsurance rate inside the donut hole was itself the product of years of gradual reform. When Part D first launched in 2006, beneficiaries in the coverage gap paid the full, unsubsidized cost of their drugs, with no help from either the plan or the manufacturer. Starting in 2010, the Affordable Care Act began phasing in a gradual "closing" of the gap, reducing that cost share year by year until it reached the 25% rate that applied by the time the gap was ultimately eliminated entirely in 2025, marking the final step in a reform process that had been underway for well over a decade.

When and why it was eliminated

The Inflation Reduction Act of 2022 phased in a series of Medicare drug pricing reforms, and the elimination of the coverage gap took full effect on January 1, 2025. This wasn't a temporary suspension or a one-year experiment — it's permanent structural legislation, and it fully applies to every CMS-approved Part D plan in 2026 and 2027 as well. The donut hole is not scheduled to return, and no current legislation would bring back the old four-phase structure.

It's worth understanding the elimination alongside the law's broader set of Part D reforms, since the coverage gap wasn't removed in isolation. The same legislation introduced the annual out-of-pocket cap itself, the $35 monthly insulin copay cap, and the Medicare Prescription Payment Plan, all phased in together as part of a coordinated redesign rather than as separate, disconnected changes.

What replaced it: the three-phase structure

In place of the old four-phase system, Medicare Part D now runs through three phases: a deductible phase, where you pay 100% of covered drug costs up to your plan's maximum deductible; an initial coverage phase, where you pay your plan's copay or coinsurance rate; and a catastrophic phase, which you enter once your verified out-of-pocket spending, sometimes called TrOOP (True Out-of-Pocket costs), reaches the annual threshold. Once you're in the catastrophic phase, you pay $0 for covered Part D drugs for the remainder of the calendar year — a hard stop that the old system never provided.

This is a meaningful structural improvement beyond simply removing a confusing phase name. Under the old system, even after reaching catastrophic coverage, beneficiaries still owed a small percentage of ongoing drug costs indefinitely for the rest of the year. The new structure removes that residual cost-sharing entirely once the threshold is met, giving beneficiaries a genuine, predictable ceiling on their annual drug spending for the first time in the program's history.

2026 vs. 2027: the confirmed numbers

CMS confirmed these 2027 figures directly in its April 2026 announcement of Calendar Year 2027 Medicare Advantage and Part D payment policies, so these aren't projections — they're the officially released parameters for the standard benefit. Both figures are indexed to rise annually alongside Part D spending growth, which is why the cap has increased each year since the $2,000 figure that applied when the new structure first took effect in 2025.

It's worth being clear about what "standard benefit" means here as well: these are the maximum figures CMS permits, not a universal amount every plan charges. Individual Part D plans and Medicare Advantage prescription drug plans can, and often do, offer a lower deductible than the CMS maximum, sometimes waiving it entirely for certain drug tiers, which is one more reason comparing your specific plan's actual terms matters more than assuming the standard benefit figures apply directly to your own situation.

Why outdated information is still everywhere online

Because the donut hole existed continuously for nearly two decades, an enormous volume of existing articles, videos, and even printed materials still describe it as a current feature of Medicare Part D. Much of this content simply hasn't been updated since the Inflation Reduction Act's changes took effect, and search results don't always surface the most current version first. This is genuinely one of the more common sources of confusion beneficiaries run into, since the phrase "donut hole" remains widely recognized even though the thing it describes no longer exists in current law.

This confusion isn't limited to consumer-facing content, either. Some pharmacists, benefits counselors, and even well-meaning family members who helped a loved one through Medicare years ago may still reference the donut hole out of habit, simply because it was such a persistent, widely discussed feature of the program for so long. Correcting this outdated reference point matters practically, not just for accuracy's sake, since planning around a coverage gap that no longer exists can lead someone to overestimate how much they'll actually owe for prescriptions later in the year, which can affect budgeting decisions made well in advance.

What this means for insulin and other protections

Alongside eliminating the coverage gap, the same set of Inflation Reduction Act reforms introduced a $35 monthly copay cap on covered insulin products under Part D, regardless of which coverage phase you're in. The Medicare Prescription Payment Plan, which lets beneficiaries spread out-of-pocket drug costs into monthly installments across the year, is now in its third full plan year and continues to be widely available as a voluntary option through individual Part D plans.

These protections work together with the elimination of the coverage gap to give beneficiaries a genuinely more predictable annual cost picture than existed before 2025. Someone managing diabetes with insulin, for instance, now has both the flat $35 monthly copay protection and the hard annual out-of-pocket cap working in combination, rather than facing the older system's mix of coinsurance rates that shifted depending on which coverage phase they happened to be in at any given point during the year.

What to actually check on your own plan

• Confirm your plan's specific deductible amount for the current year, since not every plan charges the full CMS-permitted maximum.
• Ask your plan directly what counts toward your out-of-pocket threshold, since only formulary drug cost-sharing typically applies.
• Review your Annual Notice of Change each September for any shift in your specific plan's cost-sharing structure.
• If a source describes a "coverage gap" as something you're currently facing, verify that information against Medicare.gov directly before acting on it.

Taking a few minutes to confirm these details directly with your own plan, rather than relying on secondhand summaries, remains the single most reliable way to know exactly where you stand for the remainder of any given plan year.

Common questions about the Medicare donut hole

Have a question that isn't answered below? Our full Medicare FAQ hub covers broader eligibility, enrollment, and cost questions, and our guide on how Medicare Part D actually works covers the current cost structure in more depth.