Prescription Drug Plans (Part D)
Covering the cost of medications with Medicare
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Prescription Drug Plans (Part D)
Medicare Part D is prescription drug coverage that helps pay for the medications you need.
Original Medicare (Parts A and B) doesn't cover most outpatient prescription drugs, which means without Part D, you'd pay the full cost out of pocket.
Part D coverage is offered through private insurance companies that follow rules set by Medicare. You can get this coverage two ways:
Stand-Alone Prescription Drug Plan (PDP)
This adds drug coverage to Original Medicare
Medicare Advantage Plan (Part C)
Many Part C plans include prescription drug coverage built in
Let's break down how Part D works.
How Part D Coverage Works
Your prescription drug costs move through different stages throughout the year. Understanding these stages helps you budget for your medications.
Stage 1: Deductible
UP TO $615 MAXIMUM
You pay the full cost of your drugs until you meet your plan's deductible. Some plans have no deductible at all.
Stage 2: Initial Coverage
25% CO-INSURANCE
After meeting your deductible, you pay 25% of drug costs. Your plan pays the remaining 75% until your out-of-pocket spending reaches $2,100.
Stage 3: Catastrophic Coverage
$0 FOR THE REST OF THE YEAR
Once your out-of-pocket costs hit $2,100, you pay nothing for covered Part D drugs for the remainder of the calendar year.
Stage 1: Deductible
UP TO $615 MAXIMUM
You pay the full cost of your drugs until you meet your plan's deductible. Some plans have no deductible at all.
Stage 2: Initial Coverage
25% CO-INSURANCE
After meeting your deductible, you pay 25% of drug costs. Your plan pays the remaining 75% until your out-of-pocket spending reaches $2,100.
Stage 3: Catastrophic Coverage
$0 FOR THE REST OF THE YEAR
Once your out-of-pocket costs hit $2,100, you pay nothing for covered Part D drugs for the remainder of the calendar year.
What Counts Toward Your Out-of-Pocket Limit?
Your deductible payments, copays, and coinsurance all count toward the $2,100 annual limit. Monthly premiums do not count.
Once you reach this limit, your plan covers 100% of your covered drug costs for the rest of the year.
Medicare Part D Costs 2026 - Premiums & Fees
Your prescription drug costs move through different stages throughout the year. Understanding these stages helps you budget for your medications.
Average Monthly Premium
$34.50
Stand-Alone Plans (Approx)
Maximum Annual Deductible
$615
Some Plans Have Lower or No Deductible
Out-of-Pocket Maximum
$2,100
Per Year
The Coverage Gap is Gone
Good news: The Medicare "donut hole" no longer exists.
Before 2025, there was a coverage gap where you'd pay more for your drugs after reaching a certain spending threshold. Thanks to recent changes, this gap has been eliminated entirely.
Now, you simply move from the initial coverage stage straight to catastrophic coverage once you hit your out-of-pocket maximum.
Special Benefits & Savings
$35 Insulin Cap
If you use insulin, you'll pay no more than $35 per month for each covered insulin product. This applies even if you haven't met your deductible yet.
Medicare Prescription Payment Plan
Struggling with upfront costs? You can now spread your out-of-pocket drug expenses across the calendar year in monthly instalments, rather than paying everything at the pharmacy.
Free Vaccines
All vaccines recommended by the Advisory Committee on Immunization Practices are available at no cost, with no deductible or copay required.
Extra Help (Low-Income Subsidy)
If you have limited income and resources, you may qualify for Extra Help, a program that significantly reduces your Part D costs.
Extra Help can lower or eliminate:
- Premiums
- Deductibles
- Copayments
To see if you qualify, visit the Social Security Administration website or contact Medicare directly.
Late Enrollment Penalty
If you don't sign up for Part D when you're first eligible and don't have other creditable drug coverage, you may face a permanent penalty.
The penalty is calculated as 1% of the national base beneficiary premium ($38.99 in 2026) multiplied by the number of months you went without coverage.
This amount is added to your monthly premium for as long as you have Medicare drug coverage.
Understanding Your Formulary
Each Part D plan has a formulary, which is the list of drugs the plan covers. Before choosing a plan, make sure your medications are on the formulary.
Drugs are organised into tiers, with different cost-sharing amounts:
- Tier 1 - Preferred Generic (Lowest Cost)
- Tier 2 - Generic
- Tier 3 - Preferred Brand
- Tier 4 - Non-Preferred Brand
- Tier 5 - Specialty (Highest Cost)
Check your plan's formulary each year, as covered drugs and tier placements can change.