Medicare Part D – Prescription Drug Plans
Medicare Part D provides prescription drug coverage through private insurance companies. In 2026, out-of-pocket drug costs are capped at $2,100 — a major improvement for beneficiaries.
How Does Part D Work?
Part D plans are offered by private insurance companies approved by Medicare. They can be standalone Prescription Drug Plans (PDPs) that complement Original Medicare, or integrated into Medicare Advantage plans (Part C).
Each plan has its own formulary — a list of covered drugs organized into tiers. Lower tiers (generics) have lower copays; higher tiers (brand-name, specialty) have higher costs.
2026 Part D Benefit Structure
Starting 2026, Part D has only 3 stages (no more coverage gap):
- 1Yearly Deductible (up to $615; some plans have $0)
- 2Initial Coverage (standard benefit is 25% coinsurance; most plans use tiered copays that achieve equivalent value)
- 3Catastrophic Coverage (plan pays 60%, drug manufacturers 20%, Medicare 20%)
Out-of-Pocket Cap (2026)
$2,100
Once you hit this, you pay $0 for covered drugs for the rest of the year
Max Deductible (2026)
$615
Some plans have $0 deductible
Late Enrollment Penalty
If you don't enroll in Part D when first eligible and don't have other creditable drug coverage, your penalty is 1% of the national base beneficiary premium (NBBP) multiplied by the number of months you went without coverage, rounded to the nearest $0.10. In 2026, the NBBP is $38.99/month.
Example — 24 months without coverage:
$38.99 × 0.24 = $9.36 → rounded to $9.40/month added to your Part D premium
The penalty is added to your Part D premium every month for as long as you have Part D. The dollar amount recalculates each year because the NBBP changes annually.
Choosing a Part D Plan
When selecting a plan, consider:
- Formulary — make sure your medications are covered
- Cost-sharing — deductible, copays, and coinsurance for your specific drugs
- Pharmacy network — check if your preferred pharmacy is in-network
- Monthly premium — how it fits your budget