Medicare Part D Drug Cost Calculator

For nearly two decades, Medicare Part D had a genuinely strange design: a period in the middle of the benefit year — the infamous 'coverage gap,' universally nicknamed the donut hole — where beneficiaries who'd spent enough on drugs suddenly saw their cost-sharing jump, paying a much larger share of their drug costs than they had just before entering the gap, until they'd spent enough to reach catastrophic coverage on the other side. It was confusing by design almost by accident: a gap in coverage sandwiched between two periods of better coverage, and it drove a huge amount of the persistent confusion and anxiety around Medicare drug costs.

The Inflation Reduction Act eliminated that structure entirely, effective for the 2025 plan year onward. If you're researching Medicare drug costs and encountering donut hole terminology — including in a lot of still-uncorrected content published before 2025 — it's important to know that structure simply doesn't exist anymore. It's been replaced by something meaningfully simpler and more protective: exactly three phases, with a hard annual cap on what you personally pay.

Phase one is the deductible: you pay 100% of your drug costs (for plans that use the standard deductible structure) until you've spent up to $615 in 2026. Phase two is initial coverage: you pay 25% coinsurance on further drug costs, with your plan covering the rest. Phase three is catastrophic coverage, and this is where the real change lives — once your own out-of-pocket spending (not your total drug cost, specifically what you've personally paid) reaches $2,100, your plan pays 100% of all further covered drug costs for the rest of the calendar year. There is no gap in between where your cost-sharing gets worse; the phases only ever get more generous to the beneficiary as the year goes on.

This is also why the relationship between total drug cost and your out-of-pocket cost isn't a simple percentage — someone with $3,000 in annual drug costs pays a blended rate somewhere between the deductible's 100% and the coinsurance's 25%, while someone with $10,000 in annual drug costs pays a much lower effective rate overall, because a large share of their spending falls into the $0-cost catastrophic phase once the $2,100 cap is reached. In practical terms: the person spending more on drugs each year, past a certain point, pays a smaller percentage of their own total cost, not a larger one — the exact opposite of how the old system with its middle-of-the-year gap sometimes felt.

The $2,100 cap for 2026 is itself an increase from 2025's initial $2,000 cap — CMS adjusts it annually based on Part D cost trends, the same way Part B premiums and deductibles are adjusted each year. It's worth checking this figure again each Open Enrollment period rather than assuming it stays fixed.