Medicare Part D now caps annual out-of-pocket prescription drug costs, offering greater financial protection for beneficiaries.
More than 66 million people have Medicare health coverage, according to the program. And according to the Commonwealth Fund, nine out of 10 of those Medicare beneficiaries report taking prescription drugs regularly.
While many Medicare recipients can manage their drug costs over the long term, some experience periods when access and affordability are issues. This is especially true for those on multiple medications or high-cost branded drugs.
In the past, there was a “gap” in Medicare Part D coverage for prescription drugs. That gap left Medicare recipients scrambling to cover more of their prescription costs. But that has now changed. Medicare Part D has a cap on what you’ll have to pay out-of-pocket for prescriptions.
Medicare Part D Donut Hole
According to the National Council on Aging (NCOA), up until 2025, if you spent a certain amount on prescription drugs, you’d enter the Medicare Part D “donut hole” or coverage gap.
For example, in 2024, you reached the Part D donut hole when you and your plan paid $5,030 for your medications.
At that time, Part D had four phases of coverage. They included:
- deductible
- initial coverage
- coverage gap (donut hole)
- catastrophic coverage
The Affordable Care Act that was passed in 2010 included a gradual reduction of the donut hole. But it wasn’t until the Inflation Reduction Act of 2024 that the donut hole was closed entirely.
What Is the Medicare Part D Out-of-Pocket Cap?
According to the Patient Advocate Foundation, starting in 2025, there is an annual limit on what you pay out-of-pocket for prescription medications. This applies to plans obtained through Medicare and Medicare Advantage prescription drug plans.
All prescriptions, including specialty prescriptions that are covered by Part D, come under this cap. The cap includes:
- deductibles
- copayments
- coinsurance for covered drugs
According to Medicare, the cap for 2026 is $2,100. In 2025, the annual Medicare Part D cap was $2,000. It was adjusted for inflation for this year.
The cap applies to all Medicare recipients with Part D prescription drug coverage, regardless of income level.
By Anne Johnson
