The Basics
What Is Medicare Part D?
Medicare Part D is the prescription drug benefit added to Medicare in 2006. It is provided through private insurance companies approved by Medicare. Part D covers most FDA-approved prescription drugs, though each plan has its own list of covered drugs (called a formulary) organized into cost tiers.
You can get Part D coverage two ways: as a standalone Part D plan (PDP) paired with Original Medicare, or as part of a Medicare Advantage Prescription Drug plan (MAPD) that bundles Parts A, B, and D together.
Standalone Part D (PDP)
Pairs with Original Medicare (Parts A + B). You choose a separate drug plan from a private insurer. Works alongside a Medigap supplement plan.
Medicare Advantage + Drug (MAPD)
Most Medicare Advantage plans include Part D drug coverage. If your MA plan includes drugs, you cannot also enroll in a standalone Part D plan.
What Part D Covers
Not covered by Part D
• Over-the-counter drugs
• Drugs for weight loss or gain
• Drugs for cosmetic purposes
• Most vitamins and supplements
How Drug Costs Work
Formulary Tiers Explained
Every Part D plan organizes its covered drugs into tiers. The tier determines how much you pay. Lower tiers = lower cost.
Preferred Generics
Typical copay: $0-$5The lowest-cost drugs. Generic versions of common medications. Most plans offer these at very low or $0 copays.
Non-Preferred Generics
Typical copay: $5-$15Generic drugs that are not on the preferred list. Slightly higher copay than Tier 1 but still very affordable.
Preferred Brand-Name
Typical copay: $35-$50Brand-name drugs the plan has negotiated preferred pricing for. Significantly more expensive than generics.
Non-Preferred Brand-Name
Typical copay: $80-$100Brand-name drugs without preferred pricing. You may be able to request a formulary exception if a lower-tier alternative is not appropriate for you.
Specialty Drugs
Typical copay: 25-33% coinsuranceHigh-cost specialty medications for complex conditions. These are often biologics or drugs for cancer, MS, rheumatoid arthritis, etc.
Select Care Drugs (some plans)
Typical copay: $0Some plans add a Tier 6 for insulin and certain preventive drugs at $0 copay. Not all plans have this tier.
Formulary Exception Process
If your drug is on a high tier or not covered, ask your doctor to file a formulary exception. If your doctor documents that a lower-tier alternative is not medically appropriate for you, the plan may cover your drug at a lower tier or at all. You have the right to appeal any denial.
The $2,100 Out-of-Pocket Cap
Starting January 1, 2026, there is a $2,100 annual cap on what you pay out-of-pocket for covered Part D drugs. Once you've paid $2,100 in a calendar year, your plan covers 100% of your covered drug costs for the rest of the year.
Old system
No effective cap. Catastrophic costs were possible for high-cost drug users.
New cap
$2,100 maximum out-of-pocket per year on covered drugs.
After the cap
Plan pays 100% of covered drug costs for the rest of the calendar year.
Medicare Prescription Payment Plan (M3P)
The M3P lets you spread your out-of-pocket drug costs across monthly installments throughout the year. Instead of paying a large amount when you fill an expensive prescription in January, you pay smaller equal amounts each month. You must opt in by contacting your Part D plan to enroll.
Step-by-Step
How to Choose the Right Part D Plan
Make a complete list of your medications
Include the exact drug name (generic or brand), dosage, and how often you take it. Don't forget insulin, inhalers, eye drops, and any specialty medications.
Ask your pharmacy to print a complete medication list. They can pull your full fill history.
Use Medicare.gov's Plan Finder to compare plans
Enter your ZIP code and medication list at Medicare.gov/plan-compare. The tool will show every plan available in your area, sorted by estimated annual drug cost including premiums, deductibles, and copays for your specific drugs.
Sort by 'Drug + Premium Cost' to see your true annual cost, not just the monthly premium.
Verify your pharmacy is in-network
Part D plans have preferred pharmacy networks. Using a preferred pharmacy can significantly reduce your copays, sometimes by 50% or more. Check that your current pharmacy is in the plan's preferred network, or find a preferred pharmacy near you.
Compare total annual cost, not just the premium
A $0-premium plan may cost you more overall if your drugs are on higher tiers. Always compare the estimated total annual cost (premium + deductible + copays for your specific drugs) rather than just the monthly premium.
A plan with a $35/month premium but low copays on your drugs may cost less than a $0-premium plan with high tier copays.
Review your plan every year during AEP
Plans change their formularies, premiums, and pharmacy networks every year. Your plan will send you an Annual Notice of Change (ANOC) in September. Review it carefully and compare alternatives during the Annual Enrollment Period (Oct 15 through Dec 7).
Even if you're happy with your plan, it's worth spending 15 minutes on Medicare.gov's Plan Finder each fall.
Financial Assistance
Extra Help (Low Income Subsidy)
Extra Help can save you up to $5,300/year on Part D costs
A federal program for people with limited income and resources
What Extra Help Covers
- Most or all of your Part D monthly premium
- Part D annual deductible (up to $590 in 2026)
- Reduced copays as low as $1.10-$11.20 per drug
- No coverage gap or catastrophic phase costs
- Automatic enrollment in a benchmark plan if needed
2026 Eligibility (Approximate)
Income Limit
Up to approximately $22,590/year (single) or $30,660/year (married), which is 150% of the federal poverty level.
Resource Limit
Up to approximately $17,220 (single) or $34,360 (married) in countable assets. Your home, car, and personal belongings don't count.
Apply online at SSA.gov, call Social Security at 1-800-772-1213, or visit your local Social Security office. If you qualify for Medicaid or a Medicare Savings Program, you are automatically eligible for Extra Help.
The Part D Late Enrollment Penalty
If you go without creditable prescription drug coverage for 63 or more consecutive days after your Initial Enrollment Period ends, you'll pay a permanent late enrollment penalty for as long as you have Part D coverage.
Penalty amount
1% of the national base beneficiary premium per month without coverage
2026 base premium
Approximately $36/month, so the penalty is about $0.36 per month late
Duration
Permanent. Added to your premium for life, even if you eventually enroll.
Example: 24 months without coverage
24 months x 1% x $36 = approximately $8.64/month added to your premium permanently. Over 10 years, that is over $1,000 in extra costs for a penalty that could have been avoided by enrolling in a $0-premium plan.
Common Questions