Medicare Part D Donut Hole: Costs to Compare Before AEP

Scenario: "The donut hole is gone. Why do I still need to compare Part D for 2027?"

The old Medicare Part D donut hole is gone. Formularies, tiers, and pharmacy networks on the plan you pick for January 2027 drive what you pay at the counter.

Congress closed the coverage gap through Inflation Reduction Act reforms. CMS still publishes defined-standard deductibles and out-of-pocket thresholds each plan year.

Your actual costs come from the 2027 plan ID you choose during Annual Enrollment Period, so run Plan Finder instead of relying on a carrier postcard alone.

What happened to the Medicare donut hole?#

Before those reforms, Part D used a coverage gap phase: after initial coverage, many enrollees paid a much higher share of drug costs until they spent enough to reach catastrophic coverage. Mailers and older articles still say donut hole; the title keeps that search phrase while describing today's benefit.

Compare your drug list before the technical details#

For January 2027 elections, open Medicare Plan Finder once 2027 plan data is live for your area. Enter your residential ZIP and each prescription with:

• Exact drug name
• Dosage
• Quantity
• Fill frequency
• Pharmacy you use today

Run the tool for each pharmacy you might use (retail, mail-order, or both). Preferred and standard status changes the numbers, then line up finalists on:

• Annual premium
• Deductible
• Drug tier
• Copay or coinsurance
• Pharmacy network
• Prior authorization
• Step therapy
• Quantity limits
• Estimated annual drug cost

Your premium is only part of the calculation. A lower monthly premium can still cost more if your drugs sit on expensive tiers or your pharmacy is out of network. Pair this worksheet with how to choose a Part D plan and the Medicare AEP checklist.

CMS has already published the federal 2027 Part D parameters, but individual plan premiums, formularies, pharmacy networks, and other plan-specific details should be checked when the applicable plan information is available for your ZIP.

This post is the Part D cost-structure reference for 2026 plan-year mechanics and 2027 AEP prep. Step-by-step shopping lives in how to choose Part D. Late-enrollment penalty rules live in avoiding the Part D penalty.

Federal defined-standard benefit: 2026 vs. 2027#

The table below shows CMS defined-standard Part D benefit amounts for the 2026 plan year and 2027 plan year.

Most enrollees are in plans tied to these federal parameters. Individual Part D plans can still set their own premiums, deductibles, copays, coinsurance, formularies, drug tiers, pharmacy networks, and utilization-management rules.

Your register receipt may show tier copays rather than a straight 25% coinsurance line.

For 2026, the federal Part D out-of-pocket threshold is $2,100. CMS has set the 2027 threshold at $2,400. Those are defined-standard amounts; your plan may use tier copays at the register instead of a visible 25% coinsurance line.

How defined-standard phases look on the calendar#

On a 2026 plan year contract, the federal framework typically runs like this:

True out-of-pocket (TrOOP) counts deductibles, copays, and coinsurance on covered Part D drugs. Premiums do not count. Part B drugs at an infusion center follow Part B rules, not the Part D ledger.

For January 2027 coverage, swap in the 2027 row from the table above: up to a $700 standard deductible if your plan uses it, 25% defined-standard initial coverage cost sharing, then $0 enrollee cost sharing after $2,400 TrOOP. Compare 2027 plan IDs on Plan Finder. Last year's card is not a substitute once new formularies load.

CMS raised the federal threshold from $2,000 in 2025 to $2,100 in 2026 and $2,400 in 2027. Whether you reach catastrophic coverage in March or November still depends on formulary tiers and pharmacy rules on your contract, not the headline number alone.

Preferred vs. standard pharmacy pricing#

For the same prescription, a plan may charge a different amount at a preferred pharmacy than at a standard network pharmacy. The gap depends on the plan's pharmacy network and cost-sharing rules, not on your ZIP alone.

The federal out-of-pocket threshold is the same nationwide for a given plan year, but what you pay along the way depends on the plan's formulary, pharmacy network, and cost-sharing structure. I don't rank plans by premium until the drug list and pharmacies match on every finalist.

25% cost sharing: what it means at the register#

Under the 2026 defined-standard Part D benefit, initial coverage uses 25% cost sharing after the deductible. Individual Part D plans can structure member cost sharing through copays, coinsurance, or other plan-specific amounts for different drug tiers.

That replaced the old gap where you might have paid 25% on some drugs and a higher percentage on others while the plan paid almost nothing in the coverage gap.

Many plans display tier copays at the pharmacy instead of raw 25% coinsurance. A tier 1 generic might show as a flat copay.

Specialty tiers often show coinsurance percentages that differ from the register price on a brochure summary.

Run each drug on Plan Finder with your exact pharmacy before you lock in January coverage. A mailer tier table is not a substitute for that pass when prior authorization or quantity limits apply.

IRA drug price negotiation#

Medicare drug price negotiation affects selected drugs on a published schedule. The first 10 Medicare-negotiated drug prices took effect January 1, 2026. Another 15 negotiated prices take effect January 1, 2027.

Check whether any medications you take are included in the negotiated-price program for the applicable plan year. Tier placement can still differ by plan even when a negotiated price applies federally.

Official Part D cost rules: Medicare Part D costs.

Can the Medicare Prescription Payment Plan help with high drug costs?#

The Medicare Prescription Payment Plan lets eligible Part D enrollees spread covered prescription out-of-pocket costs across the year in monthly payments.

It does not lower the underlying drug costs or change the annual Part D out-of-pocket threshold. It is a budgeting tool: useful when large pharmacy bills cluster early in the year, less useful if you prefer paying as you fill.

Details and eligibility are on Medicare.gov. Read the plan materials before enrolling; it is not the right fit for everyone.

Part D cap vs. Advantage medical cap#

Do not confuse the Part D drug out-of-pocket threshold ($2,100 in 2026; $2,400 in 2027 under CMS defined-standard amounts) with a Medicare Advantage plan's maximum out-of-pocket limit on medical services: hospital, specialist, ambulance. They are separate ledgers on MA-PD products.

Original Medicare plus standalone Part D has no medical cap without Medigap. The drug threshold helps prescriptions. Hospital exposure still needs its own plan path. See Medicare Advantage vs. Original Medicare for that fork.

Why fall comparison still matters when federal rules are national#

Formularies and cost sharing can change from one plan year to the next, so review the plan's current information before enrolling or renewing coverage. Tier moves and pharmacy list changes show up on the Annual Notice of Change.

Federal caps still move on CMS's schedule. For 2026, the Part D out-of-pocket threshold is $2,100. For 2027, it is $2,400. Months to reach that threshold depend on your drug list.

Annual Enrollment Period runs October 15 through December 7 for January 1 changes. Timing and rules are on Medicare open enrollment dates.

Save Plan Finder printouts with the 2027 plan ID before you submit an election. I would rather document that run once than guess from memory in January. Part B costs use a separate ledger; see Part B premium 2026.

When pharmacy costs spike mid-year#

Pharmacists often flag cost-sharing jumps at the register. That spike is usually deductible phase, tier copays, or non-preferred pharmacy pricing stacking toward the federal threshold, not the old four-phase donut hole returning. If costs jump mid-year, check:

1. Did you recently meet the plan deductible?
2. Did a drug move tiers on the January formulary update?
3. Are you filling at a non-preferred pharmacy?

Any one of those can feel like a donut hole even when the federal coverage gap is gone.

Model your drugs on Medicare Plan Finder. For the full shopping walkthrough, start with how to choose a Part D plan. See our Medicare guides hub and Medicare tools hub and compare Medicare costs.

Schedule a consultation or call (850) 613-0057 for a no-cost drug plan review. Phone or video.

Licensed in Florida, Alabama, Georgia, and North Carolina. Independent, not tied to one carrier.

Plan availability, networks, drug formularies, and benefits vary by county and year. For all options in your area, contact Medicare.gov or 1-800-MEDICARE (TTY: 1-877-486-2048).