How Medicare Part D Works in 2026
Medicare Part D is prescription drug coverage — and without it, a single medication could cost you thousands of dollars out of pocket. Here's everything you need to know to choose the right plan and avoid costly mistakes.
What Is Medicare Part D?
Medicare Part D is the prescription drug benefit offered through Medicare. It was created in 2006 and is run by private insurance companies that are approved and regulated by Medicare.
Original Medicare — Parts A and B — does not cover most prescription drugs you take at home. Part D fills that gap. Without it, you pay full retail price for every medication.
Two Ways to Get Part D
- Standalone Part D Plan — add drug coverage to Original Medicare (Parts A + B). You keep your regular Medicare and add a drug plan separately.
- Medicare Advantage (Part C) — most Medicare Advantage plans include drug coverage built in. If you have Medicare Advantage with drug coverage, you already have Part D.
Who Needs a Standalone Plan?
- ✅ You have Original Medicare and no drug coverage
- ✅ You have a Medigap supplement plan (which doesn't include drugs)
- ✅ You're losing employer drug coverage
- ⚠️ Do NOT add a standalone Part D if you have Medicare Advantage with drug coverage — you can't have both
What Does Part D Cover?
Each Part D plan has a formulary — a list of covered drugs. Plans are required to cover at least two drugs in each therapeutic category, but the specific drugs, tiers, and costs vary by plan.
Drug Tiers — How Pricing Works
Preferred generics
Lowest copay ($0–$5)
Non-preferred generics
Low copay ($5–$15)
Preferred brand-name drugs
Medium copay ($30–$50)
Non-preferred brand-name drugs
Higher cost (25–33% coinsurance)
Specialty drugs
Highest cost (25–33% coinsurance)
What Does Part D Cost in 2026?
Part D costs vary by plan, but there are four main expenses to understand:
Monthly Premium
The amount you pay each month to have the plan, regardless of whether you use any drugs. Averages around $30–$60/month in 2026, but ranges widely.
Annual Deductible
What you pay out of pocket before the plan starts covering drugs. The 2026 maximum deductible is $590. Many plans have $0 deductibles for Tier 1 and 2 drugs.
Copays / Coinsurance
Your share of the cost each time you fill a prescription. Copays are flat fees (e.g., $10). Coinsurance is a percentage of the drug's cost (e.g., 25%).
Out-of-Pocket Maximum
In 2026, once you've spent $2,000 out of pocket on covered drugs, your plan pays 100% for the rest of the year. This is new as of 2025 — a major improvement.
Extra Help (Low Income Subsidy)
If your income is limited, you may qualify for Extra Help — a federal program that reduces or eliminates Part D premiums, deductibles, and copays. In 2026, individuals earning under ~$22,590/year may qualify. Apply through Social Security at ssa.gov.
The Coverage Gap — No More "Donut Hole"
For years, Medicare Part D had a coverage gap called the "donut hole" — a range where you paid significantly more for drugs. Good news: the donut hole effectively ended in 2025.
Starting in 2025 (and continuing in 2026), once you hit the out-of-pocket maximum of $2,000, your plan covers 100% of covered drug costs for the rest of the year. You no longer face a gap in coverage where costs suddenly spike.
When and How to Enroll in Part D
Initial Enrollment Period (IEP)
The 7-month window around your 65th birthday — 3 months before, the month of, and 3 months after. This is your first chance to enroll without penalty.
Annual Enrollment Period (AEP)
October 15 – December 7 every year. You can switch plans, join Part D for the first time (with possible penalty), or drop coverage. Changes take effect January 1.
Special Enrollment Period (SEP)
If you're losing other drug coverage (employer plan, union plan), you get a 63-day window to enroll in Part D without penalty.
The Late Enrollment Penalty
If you don't sign up for Part D when you're first eligible and you don't have other creditable drug coverage (coverage at least as good as Medicare's), you'll pay a permanent late enrollment penalty.
The penalty is 1% of the national base premium for every month you went without coverage. In 2026, that's about $0.37 per month for each month uncovered — it adds up and never goes away.
Example: If you went 24 months without drug coverage, your penalty would be about 24% added to your monthly premium — forever.
Creditable coverage includes most employer plans, TRICARE, VA drug benefits, and some union plans. If you have any of these, get a letter confirming it's creditable — you'll need it if you enroll in Part D later.
How to Choose the Right Part D Plan
The best Part D plan is the one that covers your specific medications at the lowest total cost — not necessarily the one with the lowest premium.
Make a list of all your medications
Write down every prescription drug you take — generic name, brand name, dosage, and how often you fill it. You'll need this to compare plans.
Use Medicare's Plan Finder tool
Go to medicare.gov/plan-compare and enter your medications. The tool shows every plan available in your zip code ranked by estimated annual cost for your specific drugs.
Check your pharmacy
Plans have preferred pharmacy networks. Using a preferred pharmacy can significantly lower your copays. Make sure your pharmacy is in-network before enrolling.
Look at total annual cost — not just the premium
A plan with a $0 premium but high drug copays may cost more than a plan with a $35 premium but lower copays. Calculate your estimated total annual cost.
Review plan star ratings
Medicare rates Part D plans on a 1–5 star scale. Look for plans with 4 or 5 stars for better service and coverage reliability.
Want help comparing Part D plans in your area?
GoHealth's free comparison tool lets you see every plan available at your zip code, filter by your medications, and compare total annual costs side by side — at no charge to you.
Compare Part D Plans Free — GoHealthAffiliate link — we may earn a commission at no extra cost to you. Learn more.Frequently Asked Questions
Can I have Part D and Medicare Advantage at the same time?
Only if your Medicare Advantage plan does not include drug coverage (very rare). Most Medicare Advantage plans include Part D. Enrolling in both would result in losing your Medicare Advantage plan.
What if my drug isn't on my plan's formulary?
You can request an exception from your plan, ask your doctor to prescribe a covered alternative, or switch plans during the Annual Enrollment Period. In urgent situations, plans must provide a temporary supply.
Do I need Part D if I don't take any prescriptions right now?
It's worth enrolling to avoid the late enrollment penalty — even if you don't take medications today, that could change. A low-premium plan costs very little and protects you from future penalties.
Can I switch Part D plans every year?
Yes — during the Annual Enrollment Period (October 15 – December 7) you can switch to any Part D plan available in your area. Your new coverage starts January 1.
Does Part D cover insulin?
Yes. Under the Inflation Reduction Act, Medicare Part D caps insulin costs at $35 per month per covered insulin — a significant savings for people with diabetes.
What is the Medicare $2,000 out-of-pocket cap?
Starting in 2025, Medicare Part D has a $2,000 annual out-of-pocket cap. Once you've spent $2,000 on covered drugs in a year, your plan pays 100% for the rest of the year. This eliminated the old "donut hole" coverage gap.
Find Your Best Part D Plan in Minutes
Enter your medications and zip code to see every plan available to you — ranked by total annual cost. Free, no obligation.
Compare Part D Plans FreeAffiliate link — we may earn a commission at no extra cost to you. Learn more.