If you’re turning 65 or becoming Medicare eligible, one of your challenges is choosing a drug plan. Many are confused by the term “Donut Hole” (also called the Coverage Gap). Effective January 1st, 2025, the Coverage Gap or Donut Hole was eliminated. Medicare Prescription Drug Plans have have 3 parts or phases, Initial Deductible, Initial Coverage and Maximum Out of Pocket.

1. The drug plan you choose for 2026 might have no deductible or a deductible as high as $615. Many drug plans have no deductible on the inexpensive generic drugs, but have deductibles on the more expensive brand drugs. This is one way the insurance companies that market these plans control their costs and encourage their members to use generic drugs whenever possible.
2. After the initial deductible (if there is one) is met you enter the Initial Coverage Phase. During this period you only pay a copay or a percentage of your prescription drugs. If you purchase a drug with a retail value of $100, but pay $30, the entire $100 counts toward your Maximum Out of Pocket. 
3. Although in 2025 the Medicare Maximum out Pocket was $2,000, for 2026 it has increased slightly to $2,100. Since what the policy holder and their drug plan combined counts towards the Maximum out of Pocket, the policy holder actually pays less than $2, 100.