Medicare, the federal health insurance program designed primarily for adults age 65 and older, can seem like an alphabet soup of parts. Medicare Part A and Part B, also known as “original Medicare,” are standard coverage, but what about Part D, the prescription drug coverage portion?
If you’re trying to determine whether it makes sense for your health needs and your budget to add Part D to your Medicare plan, read on for how much it costs and what a prescription drug coverage plan can do for you.
[READ GoodRx and Medicare Part D: How to Use GoodRx to Save Money on Prescriptions]
At-a-Glance 2026 Cost Summary
| Cost component | 2026 Limit or Amount | How It Works |
| Average monthly premium | $34.50 (the national base beneficiary premium is $38.99) | What you pay monthly to keep your coverage active |
| Maximum annual deductible | $615 | What you pay out-of-pocket before coverage kicks in |
| Out-of-pocket cap | $2,100 | The maximum amount you pay per year for covered drugs |
| Catastrophic stage | $0 copay | What you pay out of pocket once you hit the $2,100 cap |
| Insulin cap | $35 per month | The maximum copay for Part D-covered insulin (no deductible) |
[READ: How Medicare Beneficiaries Can Save Money on Prescription Drugs]
What Part D Covers
Medicare Part D covers a set list of brand-name and generic prescription drugs. This list, known as a formulary, typically includes at least two drugs from among the most commonly prescribed categories.
Medicare Part D plans typically further sort drugs according to a tiered pricing system to help reduce costs. The lower the tier, the lower the cost of medication. The number of tiers and costs a plan offers can vary, but you’ll typically find between four and six tiers, such as the ones below.
| Tier Level | Category | General Cost |
| Tier 1 | Mostly generic prescription drugs | Lowest copayment |
| Tier 2 | Preferred, brand-name prescription drugs | Moderate copayment |
| Tier 3 | Nonpreferred, brand-name prescriptions | Significantly higher copayment |
| Tier 4 | Specialty drugs | Highest copayment |
Source: Medicare.gov
Formularies change every year, so be sure to review the list of what’s covered and your potential copay (a fixed dollar amount you must pay at the pharmacy each time you fill a prescription) during each annual enrollment period.
Lower costs on popular brand-name drugs
As part of the Inflation Reduction Act (IRA) of 2022, Medicare beneficiaries now have significantly lower out-of-pocket costs on 10 Part D drugs:
— Eliquis
— Enbrel
— Entresto
— Farxiga
— Fiasp and NovoLog (insulin)
— Imbruvica
— Januvia
— Jardiance
— Stelara
— Xarelto
Coverage Stages and the $2,100 Cap
Most Medicare Part D plans and Medicare Advantage plans that include drug coverage have three stages.
| Stage | Description |
| Deductible stage | For plans with deductibles, you pay out of pocket until you reach the specified dollar threshold. |
| Initial coverage stage | After the deductible is met, you’ll start paying 25% of the cost as coinsurance for your generic and brand-name drugs until your out-of-pocket spending on drugs covered by your Part D plan reaches $2,100. |
| Catastrophic coverage stage | If your out-of-pocket spending hits $2,100, you’ll reach the catastrophic coverage stage, during which you no longer have to pay anything out of pocket for covered Part D drugs for the rest of the calendar year. |
Additional 2026 out-of-pocket rules and protections
In addition to the coverage cap, the IRA introduced other measures to make medications more affordable for Medicare beneficiaries:
— Insulin savings: Insulin is now capped at $35 per month (or $105 for a three-month supply) and is exempt from plan deductibles.
— Low-income assistance: The Extra Help program, which is intended to cover people who earn less than 150% of the federal poverty level, caps generic drugs at $5.10 and brand-name medications at $12.65 for qualifying beneficiaries.
— GLP-1 weight loss coverage: Starting in July 2026, monthly copays for GLP-1 weight loss medications are capped at $50 for qualifying beneficiaries.
— Payment plan auto-enrollment: If you’re enrolled in the Medicare Prescription Payment Plan, your reenrollment is now automatic unless you opt out or change to a new Part D or Medicare Advantage plan.
[READ: How the 2026 $2,100 Part D Cap Affects Your Pharmacy Bill]
Higher-Income Surcharges
Medicare’s income-related monthly adjustment amount, or IRMAA, is an income-based surcharge that you may have to pay in addition to your Medicare Part B and Part D premiums. This extra fee is based on your modified adjusted gross income, or MAGI. That figure is calculated from your tax filings for the two years preceding your Medicare enrollment date.
Medicare’s IRMAA can be tricky to parse, and the monthly fee can vary significantly. Here’s how it works at a glance. (Figures for 2026 are based on your 2024 yearly income.)
| Individual tax returns with MAGI | Married, filing jointly, with MAGI | Married, live together, filing separately, with MAGI | Part D IRMAA amount, on top of your Part D premium |
| Less than or equal to $109,000 | Less than or equal to $218,000 | Less than or equal to $109,000 | $0 |
| Greater than $109,000 and less than or equal to $137,000 | Greater than $218,000 and less than or equal to $274,000 | N/A | $14.50 |
| Greater than $137,000 and less than or equal to $171,000 | Greater than $274,000 and less than or equal to $342,000 | N/A | $37.50 |
| Greater than $171,000 and less than or equal to $205,000 | Greater than $342,000 and less than or equal to $410,000 | N/A | $60.40 |
| Greater than $205,000 and less than $500,000 | Greater than $410,000 and less than $750,000 | Greater than $109,000 and less than $391,000 | $83.30 |
| Greater than or equal to $500,000 | Greater than or equal to $750,000 | Greater than or equal to $391,000 | $91 |
If you experience a major life-changing event, such as the death of a spouse, divorce or loss of employment that has reduced your income during your coverage year, you can request a reduction in your IRMAA. Whether you pay the IRMAA can also vary from year to year, depending on income fluctuations and adjustments to the MAGI threshold levels.
Part D Late Enrollment Penalty
It’s important to stay on top of your Medicare elections, as you could end up having to pay a late enrollment penalty for Medicare Part D coverage in some circumstances.
This amount can add up over time, says Adria Goldman Gross, a medical bill advocate with MedWise Insurance Advocacy, a division of MedWise Billing Inc., in Monroe, New York, and co-author of “Solved! Curing Your Medical Insurance Problems.”
“If you have late enrollment with Part D, you will have to pay 1% for each month,” Gross says.
So, if you’re a year late in signing up, you’ll be hit with a 12% penalty. If you’re two years late, that adds up to a 24% penalty.
This penalty kicks in after just 63 days. That means if you went without creditable prescription drug coverage for this period of time or longer after you first became eligible for Medicare, you’ll likely have to pay a late enrollment penalty, adds Whitney Stidom, vice president of consumer enablement with eHealth Inc., a health insurance broker and online resource provider headquartered in Indianapolis.
However, you usually do not have to pay the penalty if you had drug coverage through an employer, a government program or through Medicare Advantage before enrolling in a Part D plan.
Gross notes that you have the right to appeal a late enrollment penalty if you feel there’s been an error.
“Sometimes there is incorrect information where your employer has you on a commercial health insurance plan even though you’re over the age of 65. If this happens to you, contact the Social Security Administration or your Medicare plan to begin the appeals process,” she says.
How to avoid the Part D late enrollment penalty
There are three ways to avoid the Part D late enrollment penalty:
— Enroll in Medicare Part D coverage when you first become eligible. Even if you don’t take any medications during your initial enrollment period — the seven-month period around your 65th birthday when you first become eligible for Medicare — adding the benefit means you won’t get hit with a late enrollment penalty later. These plans may not elevate your monthly premiums significantly, and it’s a good way to help offset future anticipated health care costs.
— Enroll in Medicare Part D immediately after you lose other creditable coverage. If you’re currently receiving pharmacy benefits from a former employer, union, the Department of Veterans Affairs, TRICARE, the Indian Health Service or an individual health insurance plan, you don’t need to enroll in Part D during your initial eligibility period. Ending that coverage, however, triggers a special enrollment period when you can, and should, add Part D coverage.
— Keep good records of your creditable drug coverage. To avoid being hit with a late enrollment penalty later, you’ll need to prove that you had creditable drug coverage from another source. Keep good records of that coverage so you’ll have the documentation necessary to show Medicare.
How to Choose a Plan and Save Money
In 2026, beneficiaries in each state have a choice of between eight and 12 stand-alone Medicare Part D prescription drug plans and an average of 32 Medicare Advantage plans that include prescription drug coverage, according to KFF. To find the right plan, you’ll need to sort through and compare your options.
When comparing Part D plans:
— Start by making a list of all your medications.
— Check the formularies of any plans you’re considering to ensure your medications are listed.
— Check the tier levels and where your medications fall on those schedules.
— Add up the costs of those medications annually, and compare the total to each plan’s deductible.
If your anticipated medication costs won’t exceed the deductible advertised, consider checking for other plans with lower deductibles that can start coverage sooner. Stidom also recommends consulting with licensed agents or online brokers to help you understand which plan meets your needs and budget.
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How Much Does Medicare Part D Cost? originally appeared on usnews.com
Update 07/22/26: This story was previously published at an earlier date and has been updated with new information.
