Part D Prescription Drug Stages: How Each Phase Works in 2026

Medicare Part D now has three stages, and you move through them in a fixed order each calendar year: the deductible stage (if your plan has one), the initial coverage stage, and the catastrophic coverage stage. In 2026 you pay the full cost of covered drugs until you meet the deductible, then generally 25% of the cost until your out-of-pocket spending reaches $2,100, and then $0 for covered drugs for the rest of the year. The old “donut hole” no longer exists.

Below, we walk through each stage with a worked example, explain what counts toward the $2,100 limit, and show where a plan can differ from the standard design.

TL;DR

• Part D has three stages in 2026: deductible, initial coverage, catastrophic coverage. The coverage gap (donut hole) was eliminated in 2025.
• The deductible can be up to $615 in 2026. After it, you generally pay 25% of covered drug costs until you have spent $2,100 out of pocket.
• Once you reach $2,100, covered Part D drugs cost $0 for the rest of the calendar year.
• Everything resets on January 1. Monthly premiums are separate and do not count as drug-stage spending.
• Plans can structure the deductible and copays differently, so check your own plan’s documents every fall.

Table of Contents

• The three Part D stages at a glance
• Stage 1: The deductible
• Stage 2: Initial coverage
• Stage 3: Catastrophic coverage
• What happened to the donut hole?
• A worked example
• What counts toward the $2,100
• Extra Help changes the picture
• Premiums, penalties and the costs outside the stages
• Our perspective: pick the plan by your drugs, not by the premium
• Checking your plan before open enrollment
• Get help comparing Part D plans in Bend
• FAQ
• Sources

The three Part D stages at a glance

Medicare describes the stages in this order: deductible, initial coverage, and catastrophic coverage. Part D itself is optional drug coverage that private insurers and other Medicare-approved companies offer to people with Medicare, so the details sit in your plan’s paperwork, not in one national price list.

Those figures come from Medicare’s 2026 cost page. A plan can also cover certain drugs before the deductible is met, according to the CMS drug coverage guide, so a low-cost generic may never feel the deductible at all.

Stage 1: The deductible

The deductible is the amount you pay yourself before the plan starts sharing costs. In 2026 it can be as high as $615. The CMS guide describes it as a yearly amount, which means it starts over every January.

Two things are worth knowing:

• Not every plan charges the full amount. Plans may use a lower deductible, or tiered copayments, as long as the overall benefit meets Medicare’s actuarial-equivalence requirements, according to MedPAC.
• Some plans skip it for certain drugs. Many plans exempt lower tiers, often generics, from the deductible. Your plan’s formulary will say which.

If you want a closer look at how the deductible plays out for people on Medicare, we cover it in our guide to the 2026 Part D deductible.

Stage 2: Initial coverage

This stage starts once you meet the deductible, or on January 1 if your plan has none. In 2026 you generally pay 25% coinsurance for covered generic and brand-name drugs until your covered-drug out-of-pocket spending reaches $2,100.

The plan pays the rest. Your actual price at the counter depends on your plan’s formulary and tiers. Medicare explains that lower-tier drugs generally cost less and specialty tiers generally carry the highest copayments. Each plan can arrange its tiers differently and can change its drug list during the year, though it must notify enrollees about changes that affect drugs they take. Our explainer on Part D drug tiers shows how to read a formulary.

Also, cost depends on where you fill the prescription. The CMS guide notes that costs vary with the plan, the drugs you take, whether you use an in-network pharmacy, and whether you get Extra Help.

Stage 3: Catastrophic coverage

Once your covered-drug out-of-pocket spending reaches $2,100 in 2026, catastrophic coverage begins automatically. You do not apply for it. Medicare says you pay nothing for covered Part D drugs for the rest of the calendar year.

That is a real change for people on expensive brand-name or specialty medications. Before the redesign, catastrophic coverage came with ongoing coinsurance for years. Now the annual exposure has a hard ceiling, at least for covered drugs. We break down the cap in more detail in our piece on the Medicare out-of-pocket maximum.

What happened to the donut hole?

It is gone. The coverage gap used to be a fourth phase between initial coverage and catastrophic coverage, where your share of costs could jump. NCOA reports that the donut hole was eliminated in 2025, leaving three phases. In its place is the annual cap, which in 2026 is $2,100.

If an older article, a relative, or a plan brochure from a few years ago mentions four stages, that is the pre-2025 design. For anyone searching for “Part D stages,” the three-stage version is the one that applies today.

A worked example

Suppose your plan has the full $615 deductible, charges 25% in initial coverage, and you take one brand-name drug that costs $1,000 a month. These numbers are our illustration, not any specific plan’s prices, and they ignore premiums.

1. January: You pay the first $615 as your deductible. The remaining $385 of the fill is in initial coverage, so you pay 25%, which is $96.25. Your January total is $711.25.
2. February through June: You pay 25% of $1,000, or $250 a month. After June you have spent $1,961.25.
3. July: You need only $138.75 more to reach $2,100. You pay that, and catastrophic coverage begins.
4. August through December: You pay $0 for that drug.

Total drug-stage spending for the year: $2,100. Now compare a person on a $40 generic. They may never leave the initial coverage stage, and they may pay little or nothing toward a deductible if the plan exempts generics. Same plan, very different year.

Monthly premiums are a separate bill. If you are comparing how Medicare and Medicaid handle recurring costs, Medicare versus Medicaid costs explains how a monthly premium differs from the per-drug spending that moves you through the stages.

What counts toward the $2,100

This is where people get surprised. The limit is not just what you personally hand the pharmacist. Per Medicare Interactive’s stage explanation, amounts that can count include:

• Your deductible
• What you pay during initial coverage
• Qualifying payments by family members or charities
• Extra Help
• Certain assistance programs
• Some enhanced-plan payments
• Costs reimbursed by other insurance

Medicare’s cost page adds that the limit includes the deductible and certain payments made on your behalf, such as Extra Help.

What does not count is just as important. Premiums are separate, and so are drugs your plan does not cover. If you pay cash through a discount card outside your plan, those purchases generally are not tracked by the plan. We explain the problem in why cash discount prices can miss the $2,100 cap.

Extra Help changes the picture

Low-income beneficiaries get lower cost sharing and additional premium assistance, MedPAC notes. Extra Help payments also count toward the annual limit. If your income and resources are modest, it is worth checking before you assume you are paying the standard amounts. Our Extra Help overview covers who tends to qualify and how to apply.

Premiums, penalties and the costs outside the stages

The stages describe what you pay at the pharmacy. Your total Part D cost has other pieces. The CMS guide lists a monthly premium, an annual deductible, and copayments or coinsurance, and notes that premiums vary by plan and may include an income-related surcharge or a late-enrollment penalty.

The late-enrollment penalty is the one people regret most. It can apply if you go without creditable drug coverage after your initial enrollment window. If you are turning 65, our step-by-step Medicare guide for turning 65 lays out when to sign up for each part so you avoid it.

Our perspective: pick the plan by your drugs, not by the premium

We sit across the table from Central Oregon neighbors every fall, and the same pattern repeats. People compare monthly premiums, pick the cheapest, and discover in February that their brand-name medication sits on a high tier or that their pharmacy is out of network. The stages matter, but they are only the skeleton. What fills them in is your plan’s formulary, tiers and pharmacy network.

Here is how we approach it. We start with your actual medication list, the doses and the pharmacy you use. Then we look at how each available plan would treat those drugs through the deductible and initial coverage stages, and how quickly each would get you to the $2,100 ceiling. For someone with one inexpensive generic, a low premium may win. For someone on a costly brand drug who will hit the cap by midsummer, the total-year math can point somewhere else entirely.

The second thing we stress is that a plan that fit you last year may not fit this year. Formularies change, and so does your health. An annual review is not a sales call. It is a check that nothing moved under your feet. We do this as an educator first: the consultation is free, and you leave understanding your options whether or not you enroll through us.

— Jesse Zimmerman

Checking your plan before open enrollment

A short routine each fall keeps surprises out of January:

1. Read your Annual Notice of Change. It shows next year’s deductible, tiers and premiums for your current plan.
2. List every medication and your pharmacy. Include doses and how often you fill them.
3. Find each drug’s tier. A drug moving from a preferred tier to a non-preferred one can change your whole year.
4. Estimate your path to $2,100. If your drugs are costly, you will likely reach the cap, and the plan’s early-year costs matter more than its later ones.
5. Ask about Extra Help and assistance programs. They count toward the limit and may lower what you pay.

We discuss timing and what changed this year in our posts on 2026 Medicare plan changes for Bend residents and open enrollment and the $2,100 cap.

Get help comparing Part D plans in Bend

If you would rather not do this alone, we offer free consultations in person in Bend or remotely. We will walk through your medications, show how each plan would treat them, and explain the deadlines. See our Part D drug plans in Bend, OR page, or set up an annual Medicare plan review if you already have coverage and want to be sure it still fits.

FAQ

What is the initial coverage phase in Part D?

It is the stage that starts after you meet your plan’s deductible, or on January 1 if there is none. In 2026 you generally pay 25% of covered generic and brand-name drug costs until your out-of-pocket spending reaches $2,100. Your actual copay or coinsurance can vary by the tier of each drug.

Is there still a donut hole in Medicare Part D?

No. The coverage gap was eliminated in 2025, so Part D now has three stages instead of four. The annual out-of-pocket limit replaced it, which means your spending on covered drugs has a ceiling.

What happens when I reach catastrophic coverage?

It begins automatically once you reach $2,100 in covered-drug out-of-pocket costs in 2026. For the rest of the calendar year you pay $0 for covered Part D drugs. The count starts over on January 1.

Do my Part D premiums count toward the $2,100?

No. Premiums are a separate recurring charge. The limit tracks your deductible, your initial-stage payments and certain payments made on your behalf, such as Extra Help.

Do all Part D plans have the same deductible and copays?

No. The deductible can be up to $615 in 2026, but plans can use a lower deductible or tiered copayments if the overall benefit meets Medicare’s requirements. Compare each plan’s formulary and pharmacy network, not just the premium.

Sources

• How much does Medicare drug coverage cost? (Medicare.gov)
• What’s Medicare drug coverage (Part D)? (Medicare.gov)
• How do drug plans work? (Medicare.gov)
• Your Guide to Medicare Drug Coverage (CMS)
• Part D Payment System (MedPAC)
• Phases of Part D coverage (Medicare Interactive)
• The Medicare Part D Donut Hole (NCOA)

Recommended

• Medicare Part D Deductible 2026: What Enrollees Must Know
• Prescription Drug Tiers in Medicare Part D Explained
• Medicare Part D Drug Plans in Bend, OR
• Extra Help Medicare 2026: What Beneficiaries Need to Know

Disclaimer: This article is for general educational purposes only and does not constitute personalized advice. Medicare rules and plan details change frequently.