Medicare Part D 2026: Prescription Drug Plans, Costs & Enrollment

Prescription drugs can cost thousands per year — Medicare Part D helps cover them. This guide explains how Part D works, 2026 costs (including the new $2,000 out-of-pocket cap), and how to choose the best plan.

What Is Medicare Part D?

Optional prescription drug coverage offered by private insurers approved by Medicare. Two ways to get it: Standalone Part D plan (with Original Medicare) or Medicare Advantage with drug coverage (MAPD). Covers: Most prescription drugs (brand + generic). Does NOT cover: Over-the-counter drugs, weight loss drugs (mostly), cosmetic drugs, drugs covered by Part A/B.

How Part D Works (4 Phases in 2026)

1. Deductible: You pay first $590 (2026). 2. Initial Coverage: Plan pays 75%, you pay 25% (up to $5,030 total drug costs). 3. Coverage Gap ("Donut Hole"): ELIMINATED in 2025 by the Inflation Reduction Act. You now pay 25% until you hit the out-of-pocket cap. 4. Catastrophic Coverage: Once you spend $2,000 out-of-pocket (2026 cap), you pay $0 for covered drugs for the rest of the year. The $2,000 cap is a game-changer — no more unlimited drug costs.

Costs in 2026

Monthly premium: $0-$100+ (average ~$35). Varies by plan and location. Deductible: $0-$590 (some plans have $0 deductible). Copays: Tier 1 (generic): $0-$10. Tier 2 (preferred brand): $15-$45. Tier 3 (non-preferred): $45-$100. Tier 4/5 (specialty): 25-33%. Out-of-pocket cap: $2,000/year (2026). Late enrollment penalty: 1% of national base premium per month without creditable coverage (permanent).

The $2,000 Out-of-Pocket Cap (New!)

Starting in 2025, Part D out-of-pocket costs are capped at $2,000/year (indexed to inflation: $2,000 in 2026). Once you hit $2,000, you pay $0 for covered drugs. This is the biggest improvement to Part D in 20 years. If you take expensive specialty drugs, this saves you thousands.

Medicare Prescription Payment Plan (MPPP)

New in 2025: spread your out-of-pocket drug costs across the year in monthly payments (instead of paying all at once). Example: $2,000 out-of-pocket ÷ 12 months = $167/month. No interest, no fees. Opt in through your Part D plan. Great for expensive drugs at the start of the year.

Formulary & Tiers

Each plan has a formulary (list of covered drugs) organized into tiers: Tier 1: Preferred generic (cheapest). Tier 2: Generic. Tier 3: Preferred brand. Tier 4: Non-preferred brand. Tier 5: Specialty (most expensive). Check that YOUR drugs are on the plan's formulary and at what tier. Formularies change annually.

How to Choose a Part D Plan (7 Steps)

  1. List all your medications (name, dose, frequency).
  2. Enter them at Medicare.gov/plan-compare.
  3. Compare total annual costs (premium + deductible + copays).
  4. Check your pharmacy is in-network (preferred pharmacy = lower costs).
  5. Check if plan covers all your drugs (formulary).
  6. Check star ratings (4+ stars preferred).
  7. Consider mail-order (often cheaper for maintenance drugs).

Enrollment Periods

Initial Enrollment: 7 months around your 65th birthday. Annual Enrollment (AEP): Oct 15 - Dec 7. Change Part D plans. Medicare Advantage OEP: Jan 1 - Mar 31. Special Enrollment: Moving, losing coverage, etc. Late penalty: If you delay Part D without creditable coverage, you pay a permanent penalty (1% per month of delay).

Low-Income Help (Extra Help / LIS)

If your income is limited, you may qualify for Extra Help (Low-Income Subsidy): pays most of your Part D premium, deductible, and copays. Copays: $0-$11 per prescription. Apply at SSA.gov or call Social Security (1-800-772-1213). Many people who qualify don't apply — check if you're eligible.

Common Mistakes

  • Choosing based on premium alone (low premium + high drug costs = expensive).
  • Not checking if your drugs are on the formulary.
  • Skipping Part D (late enrollment penalty is permanent).
  • Not reviewing your plan annually (formularies and costs change).
  • Not using preferred pharmacy or mail-order.
  • Not applying for Extra Help if eligible.

The Bottom Line

Medicare Part D with the new $2,000 out-of-pocket cap is more valuable than ever. Compare plans annually at Medicare.gov, check your drugs and pharmacy, and don't skip coverage (the penalty is permanent). The right plan can save you thousands on prescriptions.

Disclaimer: Informational only, not insurance advice. Medicare rules change annually. Consult a licensed agent or visit Medicare.gov.