Medicare Part D is prescription drug coverage sold by private insurance companies under contract with Medicare. You pay a monthly premium, and when you fill a prescription you pay a share of the cost through a deductible, then 25% coinsurance, until your out-of-pocket spending reaches $2,100 in 2026, after which the plan covers your Part D drugs for the rest of the year.1Medicare. How Much Does Medicare Drug Coverage Cost? That $2,100 cap, created by the Inflation Reduction Act, replaces the old coverage gap people used to call the donut hole. What you actually pay depends on which plan you pick, which drugs you take, and which pharmacy you use.
Two Ways to Get Part D
If you have Original Medicare (Parts A and B), you add drug coverage by enrolling in a standalone Prescription Drug Plan, usually called a PDP. Your medical benefits stay the same and the drug plan sits on top.
The other route is a Medicare Advantage Prescription Drug plan, or MA-PD. These bundle hospital, medical, and drug coverage into a single plan from a private insurer. If your Medicare Advantage plan already includes drug coverage, you don’t need a separate PDP. The trade-off: MA-PD plans typically require you to use a defined network of doctors and pharmacies, while a standalone PDP paired with Original Medicare lets you see any provider who accepts Medicare.
What Your Plan Covers
Every Part D plan has a formulary, which is the list of drugs it covers. Formularies vary between plans. The same medication that costs you $4 on one plan might not be covered at all on another, which is why premium alone is a poor way to compare plans.
Drug Tiers
Plans sort formulary drugs into tiers, and the tier drives your copay. A typical structure looks like this:2Medicare. How Do Drug Plans Work?
- Tier 1, preferred generics, with the lowest copays.
- Tier 2, preferred brand-name drugs the plan has negotiated favorable pricing on.
- Tier 3, non-preferred brand-name drugs with higher copays.
- A specialty tier for high-cost drugs, usually with coinsurance rather than a flat copay.
Some plans split generics into preferred and non-preferred, or add additional tiers. Check the tier of each drug you take before you enroll.
Protected Classes, Prior Authorization, and Exceptions
Federal rules require every Part D formulary to cover all or nearly all drugs in six protected classes: antidepressants, antipsychotics, anticonvulsants, immunosuppressants for transplant rejection, antiretrovirals, and cancer medications.3Centers for Medicare & Medicaid Services. Medicare Advantage and Part D Drug Pricing Final Rule CMS-4180-F Plans face limits on using prior authorization or step therapy to restrict access for people already on these drugs.
Even when a drug is on the formulary, the plan can require extra steps before paying. Prior authorization means your doctor must get the plan’s approval first, usually by documenting medical necessity. Step therapy means you have to try a cheaper drug and show it didn’t work before the plan covers the more expensive option.4CMS. Medicare Prescription Drug Benefit Manual Chapter 6 – Part D Drugs and Formulary Requirements
If a drug you need isn’t on the formulary, or sits on an expensive tier, you and your doctor can request a formulary exception. Your prescriber submits a statement explaining why formulary alternatives would be less effective or cause adverse effects. Requests can be made verbally or in writing.5Centers for Medicare & Medicaid Services. Exceptions
Plans can change formularies mid-year, but before dropping a drug or moving it to a pricier tier they must give affected members at least 60 days’ written notice or supply 60 days of the drug under the old terms.4CMS. Medicare Prescription Drug Benefit Manual Chapter 6 – Part D Drugs and Formulary Requirements Each September 30, you’ll get an Annual Notice of Change summarizing what’s different for the following year.
The Three Cost Stages in 2026
Part D costs move through three stages across the calendar year:1Medicare. How Much Does Medicare Drug Coverage Cost?
- Deductible stage. You pay the full negotiated price of your drugs until you’ve spent up to your plan’s deductible. The maximum any plan can charge in 2026 is $615; some plans set a lower deductible or waive it for generics.
- Initial coverage stage. You pay 25% of each covered drug’s cost and the plan pays 75%. This continues until your out-of-pocket spending reaches $2,100.
- Catastrophic coverage. Once you hit the $2,100 out-of-pocket cap, you pay $0 for covered Part D drugs for the rest of the year.
The cap counts what you pay at the pharmacy plus certain payments made on your behalf, such as Extra Help. It resets every January 1.6Medicare. Medicare and You Handbook 2026 The cap was $2,000 in 2025 and will be adjusted each year based on average Part D drug spending.7Office of the Law Revision Counsel. 42 U.S. Code 1395w-102 – Prescription Drug Benefits
Premiums and Monthly Billing
On top of what you pay at the pharmacy, every Part D plan charges a monthly premium. The national base beneficiary premium for 2026 is $38.99, but actual premiums vary by plan and region.8Medicare. 2026 Medicare Costs Enhanced plans with richer benefits charge more; some plans charge less than the base amount. A low premium can be misleading if the plan puts your drugs on expensive tiers.
Higher-income beneficiaries pay an income-related surcharge on top of the plan premium, called IRMAA. It’s based on your modified adjusted gross income from two years earlier, so your 2024 tax return determines your 2026 surcharge. There’s no surcharge at or below $109,000 for single filers or $218,000 for joint filers. Above those thresholds, surcharges in 2026 range from $14.50 per month to $91.00 per month at the top bracket ($500,000 single, $750,000 joint).9Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles If your income dropped because of a life-changing event like retirement, divorce, or the death of a spouse, you can ask Social Security to use more recent income instead.
Starting in 2025, Medicare added the Medicare Prescription Payment Plan, which lets you spread your out-of-pocket pharmacy costs into monthly installments. When you opt in, you pay nothing at the counter. The plan bills you each month, dividing your remaining drug costs by the months left in the year.10Medicare. Before Using This Payment Option It helps most if you fill expensive prescriptions early in the year and would otherwise face big bills in January and February. It doesn’t reduce your total cost; it just smooths it out.
Help With Costs if Your Income Is Low
Medicare’s Extra Help program, also called the Low-Income Subsidy, covers most or all of your Part D premiums, deductibles, and copays if your income and resources are low enough. For the full benefit in 2026, countable resources must be below $16,590 for an individual or $33,100 for a married couple, with slightly higher limits if you’ve told Social Security you expect to use some funds for burial expenses.11Centers for Medicare & Medicaid Services. Calendar Year 2026 Resource and Cost-Sharing Limits for Low-Income Subsidy Your home and personal belongings don’t count. Income generally has to fall below roughly 150% of the federal poverty level. Apply through Social Security online, by calling 1-800-772-1213, or at a local office. If you have Medicaid, you likely already qualify.
When You Can Enroll
Medicare restricts Part D enrollment to specific windows.
Your Initial Enrollment Period is seven months long: the three months before the month you turn 65, your birthday month, and the three months after.12Medicare. When Does Medicare Coverage Start? Signing up here avoids the late enrollment penalty.
The Annual Open Enrollment Period runs October 15 through December 7 each year. Anyone with Medicare can join, switch, or drop a Part D plan during this window, with changes effective January 1.13Medicare. Open Enrollment Even if you like your current plan, review the next year’s formulary and prices each fall, because plans shift what they cover.
Special Enrollment Periods open after qualifying life events like moving out of your plan’s service area, losing creditable employer drug coverage, gaining or losing Extra Help, or leaving a skilled nursing facility. These windows generally last about two months.
The Late Enrollment Penalty
If you go 63 continuous days or more without Part D or other creditable drug coverage after becoming Medicare-eligible, Medicare adds a permanent penalty to your premium. The penalty is 1% of the national base beneficiary premium ($38.99 in 2026) for every month you were uncovered.14Medicare. Avoid Late Enrollment Penalties Wait 14 months, and you’d pay about $5.46 extra per month, every month, for as long as you have Part D. Switching plans doesn’t erase it.
People most often trigger this by retiring early and assuming non-Medicare coverage is enough. If that plan’s drug benefit doesn’t meet Medicare’s creditable coverage standard, the gap counts. For 2026, a plan is creditable if it’s designed to pay at least 72% of participants’ prescription drug expenses under the revised methodology, or at least 60% under the existing methodology.15Centers for Medicare & Medicaid Services. Final CY 2026 Part D Redesign Program Instructions Your employer or plan administrator must send you a creditable coverage notice each year. Save it.
Comparing Plans and Signing Up
The Medicare Plan Finder at Medicare.gov is the tool for comparing plans.16Medicare. Explore Your Medicare Coverage Options Before you start, list each prescription you take, its dosage, and how often you fill it. Also know which pharmacy you prefer.
The Plan Finder runs your drug list against each plan’s formulary and shows your estimated annual cost at your chosen pharmacy, including premium, deductible, and copays. Two plans with the same premium can differ by hundreds of dollars once your actual drugs are plugged in.
Pharmacy networks matter. Most plans designate certain pharmacies as “preferred,” with lower copays than other in-network pharmacies. Mail-order pharmacies often offer the best pricing on 90-day fills of maintenance drugs. The Plan Finder also displays Star Ratings from one to five; a plan rated below three stars deserves skepticism even if the price looks good.
Once you’ve chosen a plan, enroll by clicking Enroll on the Plan Finder, calling 1-800-MEDICARE (1-800-633-4227), or contacting the plan directly.17Medicare. Joining a Plan After you’re enrolled, the plan sends a membership card to show at the pharmacy, and an Evidence of Coverage document that spells out exactly what’s covered and what you pay.18Medicare. Evidence of Coverage That document, not the marketing brochure, governs your benefits.